Update Salcon sells China water concessions for RM518m, to gain RM94.6m

Update Salcon sells China water concessions for RM518m, to gain RM94.6m
Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Thursday, 12 September 2013 18:47

KUALA LUMPUR (Sept 12): SALCON BHD [] announced that it has entered into agreements to sell its water concessions in China to a Chinese company for a total cash of RM518.28 million.

In a filing with Bursa Malaysia today, the company said the following agreements were signed today:

(i) conditional sale and purchase agreement between Salcon and purchaser Beijing Enterprises Water Group Limited (BEWG) for the disposals by Salcon of its entire equity interests in Salcon Darco Environmental Pte Ltd and Salcon Jiangsu (HK) Ltd to BEWG; and

(ii) conditional sale and purchase agreement between Salcon, Salcon Water (Asia) Limited, a 60%-owned subsidiary of Salcon, and BEWG for the disposals by Salcon and Salcon Water of the entire equity interests in Salcon Fujian (HK) Limited, Salcon Zhejiang (HK) Limited, Salcon Linyi (HK) Limited and Salcon Shandong (HK) Limited to BEWG.

In sum, the proposed disposals involve the disposal of the group’s subsidiaries which currently holds the concessions portfolio in the PRC (People’s Republic of China), namely in Deqing, Jiangsu, Fujian, Zhejiang and Shandong provinces.

“Despite the positive contribution from the concessions in the PRC, the group expects a more challenging operating environment going forward, mainly due to the uncertainty in the economic outlook and the prolongation of upward revision in the water tariff.

“Furthermore, intense competition from the domestic players may impede the group’s prospect of expanding into new concessions in the PRC,” said Salcon.

It added the disposals provide an opportunity to the Salcon Group to unlock the value of its investments and allow the group to strengthen its financial position by reducing the gearing level of the group.

Proceeds from the proposed disposals will also be used for expansion of its other core business, including the property development segment and/or investments in new income stream.

“Upon completion of the proposed disposals, the Salcon Group is expected to realise a net gain of RM94.61 million…The net gain attributable to owners of the company represents an EPS of RM0.16.

“The proposed disposals are expected to contribute positively to the future earnings of the Salcon Group and to strengthen the Salcon Group’s future ability to generate earnings,” said the filing.