KUALA LUMPUR (May 21): Pos Malaysia Bhd (KL:POS) is selling its ship chartering unit that mainly deals with bulk cargoes for RM123.21 million as part of a move to shed non-core businesses.

The proposed sale of PNSL Bhd to SWA Shipping Sdn Bhd will also settle outstanding intra-group trading debts and advances owed to Pos Malaysia, the company said in an exchange filing on Tuesday.

The disposal came at a time when the group announced another quarterly loss of RM19.69 million for the first quarter ended March 31, 2024 (1QFY2024), though narrower by 29% from RM27.66 million a year ago as growth in revenue from its postal services and aviation segments outpaced costs increases. The group has been loss making since FY2019.

Proceeds from the disposal are expected to strengthen its cash flow and reduce its interest expenses, Pos Malaysia said on Tuesday.

Of the RM123.21 million, SWA Shipping needs to pay RM55.61 million for the purchase of the entire equity interest in PNSL.

Meanwhile, the remaining RM67.60 million is for settling outstanding debts and advances that PNSL owes within its group of companies.

Pos Malaysia said the initial inter-company (interco) amount may be adjusted based on an independent verification process by which, for the period from July 1, 2023 to April 30, 2024, the Interco amount will be verified by an auditor chosen by SWA Shipping.

Meanwhile, for the period from May 1, 2024 to the completion date, the Interco amount will not be audited, but Pos Malaysia must provide monthly statements detailing movements of the Interco amount, including a brief description of the purpose of these movements.

The proposed disposal would allow it to “reposition and realign its investments into more profitable businesses with growth prospects, in line with current industry trends”, the company said.

The disposal is expected to “unlock and realise the value of the investment in PNSL”, which represents part of Pos Malaysia's non-core businesses, with the proceeds to be raised expected to strengthen its cash flow position and contribute positively to future earnings.

Pos Malaysia said it plans to allocate RM92.94 million of the disposal proceeds for working capital, and RM27.81 million for repayment of bank borrowings, which stood at approximately RM505 million as of Dec 31, 2023.

SWA Shipping, the acquiring entity, is a private company specialising in freight forwarding and transportation in international and coastal waters.

Subject to regulatory approvals and barring any unforeseen events, the disposal is anticipated to conclude within four months following the signing of the sale and purchase agreement, Pos Malaysia said.

At market close on Tuesday, shares in Pos Malaysia settled unchanged at 47 sen, valuing the company at RM363.99 million. Year to date, the stock has slipped 6%.