Zico Holdings to sell 2 offshore services units for at least US$3.9m

CATALIST-LISTED Zico Holdings has agreed to sell two of its corporate services subsidiaries to Mune Investments for at least US$3.9 million in cash, the company announced in a bourse filing on Wednesday.

Additional consideration of US$340,510 or US$648,299 (see amendment note) may be payable if the shares held by certain individuals are sold at a certain price range. This would translate to net proceeds of between RM16.3 million (S$5.4 million) and RM19 million for Zico.

Zico had acquired the two units, Finova Singapore and ZICO BPO, for US$6.6 million back in 2015. It recorded the two subsidiaries' carrying value as RM21.2 million as at end-June. Factoring the net proceeds, this implies a loss on disposal of between RM2.2 million and RM4.9 million for Zico, if the sale were completed at end-June.

The subsidiaries' business of offshore incorporation and nominee services has been hit by regulatory demands for transparency on offshore entities, Zico said in its filing. This has squeezed margins and affected profitability.

For the six months ended June, the two subsidiaries generated profit before tax of RM1.3 million. They had a total net asset value of RM1.1 million as at end-June.

Zico plans to use the net proceeds to pay down RM6 million in borrowings. The balance will be used for working capital. The proceeds from the disposal would allow Zico to explore other growth opportunities, the company added.

The buyer, Mune Investments, is not related to Zico's directors or controlling shareholders, the company said. But it noted that one of Mune Investments' directors, Ng Geok Lan, is a director at Finova and ZICO BPO. Ms Ng also owns 1.83 per cent of Zico. However, the sale would not be an interested-party transaction under listing rules.

Assuming the sale were completed in December 2018, it would cut Zico's NTA from 17.45 sen per share to between 15.82 sen and 16.73 sen. Earnings per share would be cut from a profit of 1.08 sen per share to a loss per share of between 0.51 sen and 1.41 sen.

Shares of Zico closed flat at S$0.133 on Wednesday.

Amendment note: An earlier version of this story incorrectly stated the additional consideration as being over US$988,000. The article above has been revised to reflect this.