PETALING JAYA: Sinotop Holdings Bhd has proposed to dispose of its underperforming China-based fabric businesses, which has seen an erosion in profit margin in the past three financial years.
The assets comprise investments in its wholly owned subsidiary Be Top Group Ltd (Be Top) and its wholly owned subsidiary, Top Textile (Suzhou) Co Ltd, which are involved in the manufacturing and sale of fabric products.
Sinotop told the stock exchange that it has invested RM328.13 million in Be Top and RM67.17 million in Top Textile.
The disposal will be done via open tender whereby the disposal consideration can be only determined based on the winning bid upon the completion of the process.
The net profit of the foreign assets had decreased significantly from RM4.17 million in the financial period ended Dec 31, 2015 to RM0.67 million in the 18-month financial period ended June 30, 2018.
The profit margin of the foreign assets had been shrinking over the past three financial years, from a high of 2.25% in 2015 to 0.32% in the 18-month ended June 30, 2018.
Sinotop said the foreign assets are facing multiple challenges in China due to slower economic growth as well as low margins arising from stiff competition from competitors.
“In addition, Sinotop’s foreign assets are also exposed to factors such as more stringent regulatory requirements, higher production costs and exchange rates fluctuation, which have further impacted its financial performance,” it added.
Upon completion of the proposal disposal, the project management services and infrastructure construction business will become the sole core business of Sinotop.
While Sinotop may be classified as a cash company after the disposal exercise, the board intends to maintain its listing status on the Main Market of Bursa Malaysia.
Its shares gained 3.70% to close at 28 sen today with 239,300 shares done.
