KUALA LUMPUR (Oct 5): Furniture maker Federal International Holdings Bhd (FIHB) is selling an approximately two-hectare (20,044 square meter) leasehold land, on which an office and a furniture factory are built, in Banting, Selangor to Filtermation (Mfg) Sdn Bhd (FMSB) for RM24.5 million in line with FIHB’s plan to improve manufacturing efficiency by centralising its manufacturing operations.

The proceeds from the proposed disposal of the land along Jalan Kompleks Perabut Olak Lempit will provide immediate cash flow to FIHB, which may use the money to finance a special dividend payment to shareholders and fund the seller's expansion into new businesses, FIHB said in a filing with Bursa Malaysia on Tuesday.

"The management has decided in [an] earlier management review to relocate its current operations to one single location in Puchong for the group as it would result in significant cost savings accrued from operating out of a single centralised factory centre. Upon completion of the proposed disposal, the company is expected to realise an estimated net gain on disposal (net of taxation and estimated expenses) of approximately RM4 million.

"The use of the net proceeds from the proposed disposal will be reviewed and determined by the board in the best interest of the company. Utilisation may include inter-alia for repayment of bank borrowings, expansion into new business opportunities that contribute positively to the group's continued growth, for example the renewable energy segment, reinvesting in Industrial Revolution 4.0 (IR 4.0) technologies for its manufacturing division and working capital purposes of the company and/or its subsidiaries," it said. 

"In addition, the board of directors may also consider payment of special dividend to shareholders upon completion of the proposed disposal. The net proceeds are expected to be fully utilised within twelve months from the completion of proposed disposal,” FIHB added.

The proposed disposal is expected to be completed by the second quarter of 2022, according to FIHB, which indicated that the original cost of investment for the land, which was acquired on Jan 28, 1989, was RM4.52 million.

The net book value of the property as at June 30, 2021 was RM18.5 million. 

"The market value of the land and factory of RM19 million as appraised by Messrs Mohd Nor & Partners (KL) Sdn Bhd based on valuation report dated Dec 31, 2019 and updated indicative valuation dated Sept 30, 2020,” FIHB said.

FIHB’s share price closed unchanged at 60.5 sen, giving the company a market capitalisation of RM82.38 million.

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