Hiap Seng to sell entire 80% stake in UAE subsidiary for 2.7m dirham

HIAP Seng Engineering has agreed to dispose of its entire 80 per cent interest in its United Arab Emirates (UAE) subsidiary, Hiap Seng Engineering FCZ (HS FCZ), for a consideration of 2.7 million dirham (S$1 million).

The buyer, an employee of Hiap Seng, is an existing 20 per cent shareholder of HS FCZ. Prior to the proposed disposal, he was also seconded to the UAE to act as a director of HS FCZ, said Hiap Seng in its regulatory filing on Thursday.

Upon completion of the disposal, which is expected by Sept 14 this year, HS FCZ will cease to be a subsidiary of Hiap Seng.

Net proceeds from the sale will be used for the group's working capital purposes, as well as to cover professional fees incurred as a result of the transaction.

The group is awaiting clarification from the SGX-ST on whether shareholder approval would be required for its proposed disposal.

In its announcement, Hiap Seng said it believes that selling HS FCZ is in the interest of the group, given that the subsidiary had been a loss-making non-core asset whose divestment will improve the group's financial position.

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Hiap Seng had also considered liquidating HS FCZ as an option to further minimise its losses, but expenses incurred from restoration and liquidation of the asset would have left the estimated realisible value "significantly lower" than the sale consideration amount, according to the group.

Projects undertaken by HS FCZ would also be affected in the event of liquidation, it added.

For illustrative purposes, Hiap Seng estimates that its Q1 FY2020 net tangible assets per share would have been a loss of 3.6 Singapore cents instead of 3.7 cents, assuming that the transaction had taken place on June 30, 2020. Earnings per share for the quarter would have been 0.52 cent instead of 0.41 cent.

As at 1.20pm on Thursday, shares of Hiap Seng were trading flat at S$0.02.