GP Industries' shares rise 3.5% after rechargeable battery business restructuring announcement

BATTERY manufacturer GP Industries' shares rose after the company proposed a demerger between the group's rechargeable batteries business and other business segments of the group on Tuesday (Dec 28).

On Wednesday, the mainboard-listed counter rose by 3.5 per cent or S$0.02 to close at S$0.60 after 432,700 shares were traded.

As part of the proposed demerger, the company said that it would transfer all of its interest in its rechargeable batteries business into GP Energy Tech, an unlisted investment holding company incorporated in the Cayman Islands.

In return, investors could either opt for the distribution of 1 GP Energy Tech share per GP Industries share held or a cash alternative expected to be approximately 7.8522 Singapore cents per share.

The proposed distribution is subject to the completion of the company's restructuring and approval of shareholders through an ordinary resolution at an extraordinary general meeting (EGM). The notice of the EGM and details regarding the proposed distribution will be dispatched in due course.

The company's controlling shareholder, GPIH, which holds 85.59 per cent of the shares in issue excluding treasury shares and subsidiary holdings, said that it is supportive of the proposed distribution and will vote in favour of the resolution. It has also said that it will not opt for the cash alternative.

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GP Industries noted that the rechargeable batteries business has become less significant over the years, accounting for approximately 11 per cent of the company's battery business in its FY2021 ended Mar 30.

It also said that while its primary batteries business uses more mature technology, its rechargeable batteries business relies on constant innovation to grow profit margins and generate profits, resulting in higher risks for the rechargeable batteries business.

Furthermore, the company said that the divestment would bring about a clearer delineation among its core business segments and focus its resources on them. These include its primary batteries segment as well as the electronic and acoustic products segment.

Assuming that the restructuring had been completed on March 31, GP Industries said that the pro forma revenue of GP Energy Tech Group would be approximately S$64.million, while its pro forma net loss before tax would be S$2.2 million for the six month period ended Sep 30 this year.

The pro forma net asset value of GP Energy Tech Group would also have been approximately S$38 million as at Sep 30.

As for GP Industries, the company's pro forma effect of de-recognising GP Energy Tech Group and adjusting for the recycling of the cumulative exchange translation reserve (CETR) attributable to GP Energy Tech Group, the net profit would have fallen to S$29.3 million from S$31.7 million. For the first half of FY2022, the company's net profit would have fallen to S$11.2 million from S$11.7 million.

The company noted that this was due to the CETR adjustments amounting to deficits.

Assuming the proposed distribution had been completed on Mar 31, 2021, GP Industries' pro forma net tangible assets would also have fallen to S$373.3 million, down from S$406.7 million.