Lasseters International proposes to dispose of Australian assets for A$105m

INTEGRATED resort operator Lasseters International Holdings on Tuesday proposed to dispose of its Australian assets and business for A$105 million (S$108.5 million), an amount nearly six times that of the group's market capitalisation of S$19 million.

The group's wholly-owned subsidiaries Ford Dynasty and Lasseters Health Club on Monday entered into various agreements with companies under Sydney-based Iris Capital, an integrated development and hospitality group.

This was for the proposed disposal of the freehold land and buildings and improvements of Ford Dynasty, its casino hotel and convention centre business and non-real property business assets. The group has also proposed to dispose of Lasseters Health Club's business and business assets.

Ford Dynasty will retain ownership of the Lasseters brand. It has entered into a separate brand licence deal with one of the Iris Capital entities to grant an exclusive, royalty-free licence to use the Lasseters brand in Australia.

Lasseters International said it will retain the right to use the Lasseters name and brand outside Australia and in the company names of its dormant Australian subsidiaries.

The group's board is of the view that the proposed disposal is in the group's best interests as it provides a "good opportunity" for the group to unlock the value of the assets.

It also comes as the group decides to focus its investment in Malaysia, focusing on property management, property development and the hospitality business.

Lasseters International is looking to take advantage of the depressed land value and the opportunity of lower entry point amid the pandemic. It will also look at expanding its property management services business in Malaysia.

It noted that Australia's gaming sector is "highly regulated". Recent issues surrounding the sector like alleged money laundering and possible links to organised crime may also impact the risk appetite of financial institutions.

This means the group may have to come up with additional funding for capital expenditure requirements to further uplift the value of the property in the event these financial institutions do not provide additional funding.

Moreover, there is inherent risk and uncertainty around the possibility of an increase in gaming tax on July 1, 2022 - Ford Dynasty's tax review date.

Lasseters International said it has rationalised all its loss-making Australia assets and the ones left in the proposed disposal is the remaining one. It noted there is little economies of scale in operating a single asset in a remote location.

The pandemic had resulted in the group's directors and senior management being unable to travel and be on the ground at the business location. Its hotel and convention centre is still recovering from the pandemic's aftermath.

The book value of the proposed disposal assets stood at A$121 million as at Dec 31, 2020. This includes a revaluation surplus of A$75.3 million. The tax capital gain on the proposed disposal is about A$52.9 million.

Out of the A$105 million consideration, 61 per cent or A$63.6 million will be used for the repayment of bank borrowings, while 28 per cent will be used for working capital and investments in the property management and property development business.

The rest will be used for the repayment of tax liability and the payment of professional fees and expenses incurred in relation to the proposed disposal.

The group plans to convene an extraordinary general meeting to seek shareholders' approval for the proposed transaction.

Shares of Catalist-listed Lasseters International last traded at 3.9 Singapore cents on March 19.