SECOS Group updates market on Malaysian property sale
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Sustainable and eco-friendly bioplastics developer SECOS Group Limited (ASX:SES) has released an update on the sale and leaseback of its Malaysian property, announced to the ASX in May.
Secos achieved a sale price of MYR 10.5 million (A$3.5 million) for the land and building. These proceeds will be used to reduce the company’s net debt of approximately A$1.3 million, with free cash of approximately A$2.2 million.
The Malaysian property is on a 99-year government freehold title, with the sale contract being subject to Malaysian government approval. The initial expected settlement date of November 2018 was therefore also subject to the timing of the approval process, which the company has now received.
SES’s Malaysian legal advisers have confirmed that the financial settlement and access to proceeds are now scheduled for 14 January 2019 or no later than 13 February 2019.
The small cap’s lawyers are now working with the buyer’s lawyers and its bank, CIMB, to discharge the collateral and sales proceeds in favour of SECOS.
The funds from the sale and leaseback will enable the company to accelerate its investment in resin manufacturing capacity to meet growing demand for its compostable bioplastic resins.
The company also recently completed a $2.1 million capital raising, consisting of a placement to sophisticated investors of $1.2 million and a Rights Issue to existing shareholders of $0.9 million. That funding will be used to provide cash flow for SES while it waits to receive the proceeds of the properly sale in early 2019.
In November, SES completed a strategic review into its wholly owned subsidiary Stellar Films Australia (SFA), the arm of the business which produces tradtional plastic films.
Through the review process, SES resolved to continue the transfer of SFA customers to its Malaysian operations and commence the cessation of its Australian film manufacturing operations — all to deliver some significant operating and overhead cost savings. Following these measures, the company is expecting its net profit after tax (NPAT) to improve by over $0.9 million a year.
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