This is the loss-making steel products manufacturer’s first venture into property development.
The redevelopment project is expected to be funded by the proceeds from its proposed rights issue, which was announced yesterday.
A lack of favourable prospects in the steel industry and a challenging business environment were reasons for Tatt Giap’s entry into the property development business.
The group’s maiden property development project would involve the redevelopment of its existing freehold land of 550,000 sq ft into an industrial park comprising 38 units of three-storey semi-detached and two units of three-storey detached corporate warehouse-cum-office building.
In a filing with Bursa Malaysia, Tatt Giap said that it planned to demolish the existing facilities on the land while its existing steel manufacturing operations wiould be relocated to another rented factory.
“Once completed, the project is expected to provide a valuable stepping stone for the group and will help it build an initial track record in the construction and property development industry. In turn, this will support the group’s bid for other property projects in the future.
“In view of the project, the board anticipates that the new property business segment will contribute 25% or more of group net profit,” said Tatt Giap.
Currently, the factories and office building on the land are occupied by Superinox Pipe Industry Sdn Bhd and Superinox Max Fittings Industry Sdn Bhd, both its wholly owned subsidiaries principally involved in the manufacturing and trading of stainless steel industrial welded tubes, pipes and fittings.
Meanwhile, the company has also proposed a share capital reduction exercise, whereby the RM60mil credit from the move would be utilised to set off the accumulated losses of the company.
Via the proposed share capital reduction exercise, Tatt Giap’s share capital would be reduced from RM84.68mil as at March 12 to RM24.68mil post-exercise.
Aside from that, the company has also proposed a renounceable rights issue of up to 682,453,608 new irredeemable convertible preference shares (ICPS), as well as up to 85,306,701 free detachable warrants.
Basically, the rights issue is on the basis of eight ICPS together with a free warrant, for every two existing ordinary shares in Tatt Giap.
The bulk of the proceeds from the rights issue would be used to fund the redevelopment of its land, it said.
The balance would be utilised for working capital and the repayment of borrowings, it added.