Tadmax ‘anxious’ to conclude subsidiary sale to 1MDB’s unit

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KUALA LUMPUR: Tadmax Resources Bhd is anxious to conclude the sale of its wholly-owned subsidiary Tadmax Power Sdn Bhd (TPSB) to 1Malaysia Development Bhd’s (1MDB) unit for RM317.3 million cash, as the completion date has been extended twice from Aug 20.

“We are fairly anxious. It’s an internal issue on their [1MDB] end as far as I’m concerned. They are asking for [more] time ... so basically there are no updates except to wait until Oct 31 — as requested by them. Hopefully we will conclude the deal by then,” Tadmax chief executive officer Mohamad Reezal Siddiq told reporters after Tadmax’s extraordinary general meeting (EGM) yesterday.

Mohamad Reezal said 1MDB is still keen on the acquisition and that Tadmax has no plans to abort the deal.

Tadmax had on Feb 20 entered into a share sale agreement (SSA) with Ivory Merge Sdn Bhd — of which the ultimate shareholder is 1MDB — to dispose of TPSB, which owns 310 acres (125ha) of vacant leasehold land in Pulau Indah, Klang in Selangor. The disposal consideration prices the land at RM23.50 per sq ft.

Both Tadmax and Ivory Merge have mutually agreed to vary the completion date from the unconditional date of Aug 20 to a date on or before Sept 30, and again to a date on or before Oct 10. Then on Oct 13, Ivory Merge requested to extend the completion date to a date on or before Oct 31.

Tadmax has already received a 10% deposit from Ivory Merge upon the execution of the SSA and is now awaiting the second payment of 70% or RM222.1 million, which will be paid within seven days from the completion date.

The deal is expected to rake in a gain of about RM138.39 million for Tadmax. The deal is deemed crucial for Tadmax as it has allocated RM226.2 million of the sale proceeds to repay its borrowings, which stood at RM221.2 million as at June 30, against its total equity of RM196.7 million.

Additionally, the sale will also enable it to have cash reserves of RM50 million, which will come in handy for any future acquisitions, including replenishing its land bank.

“We are currently focusing on our [first] property development project in Labuan via our acquisition of Ganggarak Development Sdn Bhd. It’s a mixed development, with 32 acres earmarked to build affordable homes for Perbadanan Labuan and the remaining nine acres for commercial development,” Mohamad Reezal said, noting that the whole 41.5 acres has an estimated gross development value of up to RM570 million.

There will be 1,560 units of affordable homes of about 800 sq ft to 850 sq ft available, with a selling price that starts from RM160,000. The project will be launched in three phases. The first phase of 520 units will be launched in December.

On its timber extraction business, Tadmax hopes to start cultivating oil palm on 500ha of its 80,000ha in the district of Jair, Regency of Boven Digoel, in Papua Indonesia, next year.

For the financial year ending Dec 31, 2014, Mohamad Reezal said the group will try to “moderate” its losses this year, but he could not guarantee that the group would return to the black.

In the six months ended June 30, Tadmax Resources incurred a net loss of RM8.5 million from the RM26.5 million it reported in the previous corresponding period, while revenue surged to RM11.55 million from RM124,000 previously, due to its industrial supplies segment.

“Once Ganggara kicks in next year, we can look forward to better numbers. Property development will be our main [earnings] contributor, hopefully more than half in the next two to three years,” Mohamad Reezal noted, adding that the group may venture into construction too.

He took over as chief executive officer on June 19 to replace Datuk Faizal Abdullah, who has since been redesignated as deputy chairman. The EGM earlier saw its shareholders approving the proposed partial settlement of a RM38.68 million debt owing to Faizal via the issuance of new ordinary shares. On completion of the corporate exercise, RM36 million of the debt owed to Faizal would be deemed repaid.

This article first appeared in The Edge Financial Daily, on October 21, 2014.