Excerpts from analyst's report
DBS Vickers analyst: Alfie Yeo
• S$60m deal with Axis REIT for its freehold production facility in Malaysia
• Non-core gains of S$34-35m recognized upon completion (by 31 Dec 2014)
• We believe there is potential for special dividends barring major acquisitions/projects
Sale and leaseback with Axis REIT. Yongnam announced this morning that it has entered into a sale and leaseback transaction with Axis Real Estate Investment Trust for its Malaysia freehold production facility located in Nusajaya Johor, Malaysia.
Under the sale and leaseback agreement, Yongnam will sell the property for RM153.5m (c.S$60m) and will lease it for 15 years with renewal option for another 15 years. Initial rent for the first three years will be RM969,313 (c.S$378,638) with step ups every three years.
Yongnam will book a disposal gain of S$34-35m over its net book value of S$24.5m. It is Yongnam's intention to enhance its financial position by unlocking equity tied up in the property.
The proceeds will be redeployed as working capital for projects, and will fund investments in infrastructure developments in the region. Axis Real Estate Investment Trust is a real estate investment trust listed on Bursa Malaysia. The transaction is expected to conclude before 31 December 2014.
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