ecoWise Holdings has disposed of its 51% stake in Saiko Rubber (Malaysia) for a consideration of RM18 million ($5.8 million).
The sale and purchase agreement was entered into by ecoWise’s subsidiary Sunrich Integrated and Kasan Corporation for the sale of 357,000 ordinary shares in Saiko.
Prior to the disposal, ecoWise owned 51% in Saiko while the remaining 49% was owned by Kato Sansho.
Kasan Corporation, a private company incorporated in Malaysia, is wholly-owned by Japan-incorporated company Kato Sansho.
Following the completion of the disposal, ecoWise will no longer have any interest in Saiko.
Saiko, for the FY2020, recorded net profit of $1.2 million. The carrying value of ecoWise’s stake in Saiko amounted to $4.21 million as at Oct 31, 2020.
The net proceeds from the disposal is approximately $5.8 million, representing a gain of $1.6 million over Saiko’s net book value.
Each of the book value and net tangible assets (NTA) of Saiko amounted to around $7.6 million as at Oct 31, 2020.
Saiko was a joint venture between ecoWise Holdings and Kato Sansho, and is in the business of manufacturing and trading of rubberised products.
According to ecoWise, the reasons for the proposed disposal was due to Saiko’s labour-intensive business with low value-add and no advance technology.
Furthermore, a majority of Saiko’s equipment has exceeded its useful life and has been used for 20 to 30 years, which means high cost of maintenance and high cost of replacement of such equipment.
Proceeds from the disposal will improve ecoWise’s cash flow position.
The disposal has been completed as Kasan Corporation has already fully paid the consideration amount to ecoWise on April 23, the same day that the agreement was signed.
Shares in ecoWise last closed 3.3 cents on April 27. It called for a trading halt before market opened on April 28.
