KUALA LUMPUR (June 30): MAG Holdings Bhd (formerly known as XingHe Holdings Bhd) has disposed of 20.91% of its 40.77% shareholding in associate Henan XingHe Oil and Fat Company Ltd (HXOF) for RM37.8 million, to reduce its losses from the investment.
MAG said in a bourse filing that its indirect wholly-owned Anyang Herun Oil Technical Service Company Ltd has entered into a share sale agreement with NXOF shareholder Huang YunLin to dispose of the stake.
On completion of the disposal, the group’s equity interest in HXOF will be reduced to 19.86% from 40.77%, and HXOF will cease to be an associate of the group.
According to MAG, the disposal will result in a loss on disposal of approximately RM8.5 million to the group. Accordingly, the group’s earnings per share for the financial period ending June 30, 2021 will be reduced by about 1.1 sen per share, it said. MAG’s original cost of investment of Anyang Herun in the 20.91% registered capital of HXOF was RM11.34 million.
“The disposal consideration was arrived at after taking into consideration the group’s carrying amount of investment in HXOF, the net assets, the historical performance and future prospects of HXOF,” it said.
HXOF, incorporated in China, is involved in the production, blending and marketing of peanut oil and other edible vegetable oils and raw peanuts. The group recorded a loss after taxation of RM536,668 for the three months ended March 31, 2021.
MAG said HXOF had been registering poor financial performance in the past several years on low production volumes, which in turn were due to production curbs on its plant, consequent to the Chinese government’s campaign against environmental pollution. The production curbs, implemented since 2016, had resulted in a tremendous loss in productivity, with the losses in HXOF also dragging the group as a whole into the red since 2017.
MAG said it recorded LAT of RM6.78 million in the financial year 2017, followed by LAT of RM25.54 million in 2018 and LAT of RM108.25 million in 2019.
“In the opinion of the directors, the future financial performance of HXOF is uncertain, in view of the production curbs, intense competition and the uncertain market, post Covid-19 pandemic.
“The group, having considered such business and operational risks of HXOF going forward, has decided to reduce its investment in HXOF,” it said.
It also said the disposal will enable the group to reposition its financial resources and commitments to focus on prawn aquaculture and other seafood processing business.
MAG closed unchanged at 19.5 sen today, valuing the group at RM146.59 million.
