SCGM shares decline following core business disposal announcement

SCGM shares decline following core business disposal announcement
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KUALA LUMPUR (May 10): Shares of plastic packaging solutions company SCGM Bhd fell in early trade on Tuesday (May 10) following the announcement of its intention to dispose of its entire core business for RM544.38 million in cash.

At 11.20am, the counter eased eight sen to RM2.30 with 7.68 million shares changing hands. Trading in SCGM’s shares was suspended for the whole of Monday pending the announcement.

On Monday, SCGM entered into a conditional agreement to sell its entire stake, or 106.47 million shares, in wholly-owned subsidiary Lee Soon Seng Plastic Industries (LSSPI) to Japanese companies Mitsui & Co Ltd and FP Corporation (FPCO).

LSSPI is SCGM’s sole subsidiary and represents the entire core business of the group. Hence, on completion of the proposed disposal, SCGM will not have any core business, subsidiary or associated company.

The proposed disposal entails Mitsui acquiring 60% equity interest in LSSPI for RM326.63 million while FPCO bought the remaining 40% for RM217.75 million.

Kenanga Research in a note said the purpose of the disposal is to enable SCGM to unlock the value of its investment in LSSPI and reward the existing shareholders for their support of the group. 

"Post-divestment, SCGM — which is expected to be classified as a 'cash company' — intends to maintain its listing status while looking to acquire new business/assets," it said. 

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