Masterskill proposes asset disposal to director for RM80m

KUALA LUMPUR (Feb 5): As part of its asset-light strategy, Masterskill (M) Sdn Bhd, a subsidiary of Masterskill Education Group Bhd (MEGB), has proposed to dispose properties in Petaling Jaya, Selangor, and Masai in Johor, to Brilland Property Sdn Bhd for RM79.7 million cash.

Brilland Property is 59%-controlled by Siva Kumar Jeyapalan, 44, while the remaining 41% is held by his family via Transaction Opinion Sdn Bhd. Siva Kumar has a 23% interest in MEGB (fundamental value: 0.8; valuation 0.6), and is the group’s chairman and executive director.

MEGB said it will dispose its six-storey commercial building in Petaling Jaya for RM41.2 million; and freehold commercial land with interconnected office blocks and other buildings in Masai, for RM38.5 million.

The 18-year old building in Petaling Jaya had a net book value (NBV) of RM43.31 million as at Dec 31, 2014, while the land and interconnected office in Masai had a NBV of RM31.85 million, which altogether totalled RM75.16 million.

“The proposed disposal, which is a part of the group’s asset light strategy, would allow the group to unlock its capital resources tied in non-operating long term assets, to raise much-needed funds for its business,” the group said in a filing with Bursa Malaysia this evening.

According to MEGB, proceeds from the disposal — RM79.7 million — will be used to pare down borrowings and fund its working capital.

Of the RM79.7 million, the group has allocated RM26.7 million to reduce its debts, which is expected to result in interest savings of RM1.4 million per year. The remaining RM53 million will be channelled towards operating, administrative and marketing expenses.

Based on its current NBV, the group is expected to reap a one-off gain on disposal of RM4.54 million.

Upon completion of the disposal, MEGB said it will enter into a 10-year leaseback agreement with Brilland Property, at a monthly rental of RM70,000 for the first 36 months, RM83,000 for the next 36 months, and RM95,000 for the subsequent 48 months until the completion of the tenure.

MEGB shares closed 2.36% lower to 62 sen today, with 3.28 million shares changing hands. Its market capitalisation stood at RM233.17 million.

It is worth noting this is MEGB’s second attempt to dispose its non-operating property assets.

MEGB had on Nov 6 last year, announced plans to sell its properties in Kuala Lumpur, Kota Kinabalu, Kuching, Pasir Gudang in Johor, and Kelantan, for RM75 million cash.

However, the deal was aborted one month later, after independent valuer Cheston International (KL) Sdn Bhd ascribed an indicative market value of RM110.4 million, which is significantly higher than its earlier indicative consideration.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations)

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