KUALA LUMPUR: HHRG Bhd has been queried by Bursa Malaysia for further information concerning its proposed acquisition of 51 per cent stakes in two companies jointly owning land in Kuala Muda, Kedah.
The exchange sought clarification on various aspects, including the earnest deposit amount and payment date, payment terms, net profits, net asset value of the target companies, and audited net assets per share.
HHRG's proposition entails acquiring 51 per cent stakes in PKB Open Road (SP Circuit) Sdn Bhd (PKBOR) and ORIC Development (SP) Sdn Bhd (ORICD), which collectively own 150 acres of land, for RM40 million in cash from Open Road World Sdn Bhd (ORW).
ORW holds 70 per cent of PKBOR and 100 per cent of ORICD, while the remaining shares are held by Permodalan Kedah Bhd and Jingshi Holdings (M) Sdn Bhd.
HHRG said it sees this acquisition as a strategic expansion of its land bank to complement its diversification efforts into property development.
Formerly known as Heng Huat Resources Group Bhd, HHRG primarily focuses on biomass material, furniture, and mattress manufacturing.
As of Dec 31, 2023 (9MFY2024), HHRG's cash and equivalents amounted to RM65.6 million, with short-term borrowings of RM11.96 million and long-term borrowings of RM25.53 million.
For 9MFY2024, HHRG saw a 61 per cent decrease in net profit to RM6.83 million, accompanied by a 22 per cent decline in revenue to RM94.88 million, attributed to higher production costs and moderated sales.
It reported that softening demand for biomass, furniture, and mattresses, particularly in the European market, contributed to the revenue decline.
Meanwhile, the filing by HHRG revealed ownership percentages among individuals and identified Menteri Besar Kedah Incorporated (MBKI) as the land's registered owner, with PKBOR and ORICD as beneficial owners.
PKBOR acquired the land from MBKI for RM24.3 million on Jan 9, 2023, subsequently selling 80 acres to ORICD for RM12.96 million. A recent valuation pegged the land's market value at RM96.68 million.
In its response to Bursa Malaysia, HHRG indicated a need to pay an earnest deposit of RM1 million and is in the process of finalising payment terms for the RM40 million consideration.
The group informed the stock exchange that the definitive agreement for the acquisition is contingent upon satisfactory due diligence and may be terminated if conditions are not met, with the earnest deposit refunded. If finalised, the financing will be entirely sourced from internal funds.
The development plans for the land remain undecided, it said.
