KUALA LUMPUR: SCGM Bhd's share price fell in Tuesday morning trade on the back of an announcement that it was planning to dispose of its entire core business for RM544.38mil cash.

       As at 9.32am, the stock was down eight sen or 3.36% to RM2.30 on the back of nearly five million shares traded.

       Trading in the shares of the plastic packaging manufacturer was suspended on May 9 in light of the material announcement.

       In a filing with Bursa Malaysia, the group said it had entered into a conditional share sale agreement with Mitsui & Co Ltd and FP Corp for the proposed disposal of 100% equity interest in Lee Soon Seng Plastic Industries (LSSPI).

       Of the stake, 60% will go to Muitsui while 40% will be purchased by FPCO.

       SCGM expects the exercise to be completed by 3Q22 pending approvals by at least 75% of the total number of issued shares held by SCGM shareholders at an extraordinary general meeting.

       Upon divestment, SCGM proposed to distribute RM69.3mil or 36 sen per share to shareholders via a capital reduction and repayment exercise and an indicative RM356.2mil or RM1.86 a share in special dividend.

       SCGM also entered into a conditional sale and purchase agreement to transfer three parcels of land with factory building and other ancillary buildings in Johor for a total cash consideration of RM18.8mil.

       In its company update, Kenanga research said the disposal consideration translates to RM2.83 a share, which is above its previous target price of RM2.34.

       "The premium valuation – which implies EV/EBITDA of 10.6x and PER of 16.0x based on LSSPI’s historical financial data for FY April 2021 – offers a timely exit opportunity for SCGM shareholders.

       "As such, we believe the deal will likely get the necessary approvals from the shareholders," it said.

       The research firm, which is keeping its forecasts pending the completion of the deal, said it believes the disposal is to enable SCGM to unlock its investment in LSSPI and reward the existing shareholders.

       It maintained its "market perform" recommendation on the stock with a new target price of RM2.53.