NEW Silkroutes Group has proposed investing in a Chinese company in the business of coal and cargo by acquiring its parent, Tianjin Zhoushun, for 11 million yuan (S$2.1 million).

Following completion of the proposed acquisition, New Silkroutes Group will be the sole shareholder of Tianjin Zhoushun through its indirect subsidiary, Beijing Lunan Technology. The group will indirectly own 59 per cent of the equity of Tianjin Zhoushun’s subsidiary, Hequ Yuanyang Industrial (HYI).

HYI is primarily engaged in the business of coal storage and sales, as well as general cargo loading and unloading. Its shareholder equity is valued at 19.6 million yuan.

New Silkroutes said it intends to finance the acquisition with internal operation funds.

On Monday (Sep 18), the group said the deal will allow it to acquire assets such as the Hequ Operation Railway Dispatching Station through HYI, thus presenting an investment opportunity in China’s transportation industry.

“The proposed acquisition will allow the company to turn around its loss-making position. This may allow the potential for growth in the market capitalisation of the company, an overall increase in investor interest and consequently, improve the liquidity of the group,” it added.

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Assuming that the acquisition had been completed on Jul 1, 2021, the group’s FY2022 loss would have stood at S$50.2 million as opposed to S$48.9 million.

Loss per share would also have increased to 24.1 Singapore cents, compared to 23.5 cents originally.

Had the acquisition been completed at end-June 2022, New Silkroutes’ net tangible liabilities per share would have been at 13.3 cents instead of 14.1 cents.

As Kelvin Chong is a controlling shareholder of both New Silkroutes and Tianjin Zhoushun’s vendor, Beijing Luoke Business Management, this constitutes an interested person transaction and is subject to approval at an extraordinary general meeting to be convened.

Shares of New Silkroutes have been suspended since Nov 15, 2021.