In another forum, people r talking about Hoe Leong Corporation. Me got curious because the company recently announced a heads of agreement to dispose of its interest in 2 Malaysian companies for S$62 million.
This is a big amount relative to the market cap of Hoe Leong of $24 million.
But there are 2 things I noted fr my reading:
1. The consideration for the disposal would be satisfied "in the form of cash and/or issuance of securities in ABT," according to Hoe Leong's announcement.
ABT is the buyer and it is a listco in Malaysia.
The assumption some people have is that the consideration is entirely in cash. It's not the case.
2. Even if it's in cash, the company has very high bank borrowings that needs to be addressed. It has S$60 m in short-term borrowings and 17 m in long-term debt, as at end-Sept 2014.
Thus, the chances of a special dividend are low, imho.
As you can see Hoe Leong is not so straight forward as I thought before reading up a bit about the proposed disposal of 2 companies.
Mencast has lots of finance expense in servicing its high debt. In 9M2015, out of $20.8 m gross profit, $4 m went to finance expenses. Admin expenses ate up another $14.2 m. Mencast was saved by a net gain of $6.5 million, mainly a one-time gain from disposal of property.