KUALA LUMPUR (Sept 20): PRG Holdings Bhd's 50.45%-owned subsidiary Furniweb Holdings Ltd is disposing of its entire stake or 50,000 shares in loss-making Meinaide Holdings Group Ltd to Omen Wealth Ltd for HK$15 million (RM8.88 million) cash. Meinaide Group is principally engaged in the trading and sale of polyvinyl chloride (PVC) and other plastic products.

Furniweb is estimated to record a preliminary gain of HK$400,000 (RM200,000) on the proposed disposal.

In a filing with Bursa Malaysia on Wednesday, PRG said Furniweb, which is listed on the GEM of the Hong Kong Stock Exchange, had on Tuesday entered into a sale and purchase agreement (SPA) with Omen Wealth for the proposed disposal, which is subject to and upon the terms and conditions stipulated in the SPA.

It added that the consideration was determined after arm’s length negotiations between Furniweb and Omen Wealth, based on the unaudited consolidated net asset value of Meinaide and its subsidiaries of HK$16.76 million (RM9.92 million) as at June 30, 2023, the historical financial performance and business prospects of Meinaide Group, and the prevailing market conditions of PVC and plastics product industry in Hong Kong and China.

Upon completion of the proposed disposal, Meinaide will cease to be a subsidiary of Furniweb and the financial results of the Meinaide Group will no longer be consolidated into the financial statement of Furniweb.

PRG said Meinaide Group recorded net losses of HK$33.4 million (RM19.8 million) for the year ended Dec 31, 2021 and HK$1 million (RM600,000) for 2022, mainly due to the decrease in sales orders resulting from weak market demand and an increase in operating costs caused by rising inflation.

"Taking into account the unfavourable and uncertain market conditions and the continuous loss-making position of Meinaide Group, Furniweb’s board of directors considers that the proposed disposal can prevent the group from suffering further losses and cash outflow for the underperforming PVC and other plastics products business. Furniweb’s board also believes that the proposed disposal provides a good opportunity for the group to focus its resources on other business segments with relatively higher profitability and/or growth potential which is conducive to the long-term growth and development of the group," said PRG.

PRG added that the proposed disposal aligns with the group’s strategy of streamlining operations and disposing of business with low profitability in order to reduce operating costs and enhance its financial position.

Furniweb intends to apply proceeds from the proposed disposal to replenish its working capital.

The proposed disposal is not subject to the approval of PRG’s shareholders. Barring unforeseen circumstances, it is expected that the exercise will be completed by the fourth quarter of 2023.

At 2.05pm on Wednesday, PRG shares traded unchanged at 20.5 sen, giving it a market capitalisation of RM88.27 million.