GKE Corporation divests 49% stake in metal logistics arm for $4.2m

It’s been battered by gloomy market sentiment.

GKE Corporation is bidding farewell to its 49% stake in GKE Metal Logistics (GKEML), as the company has inked a Memorandum of Understanding (MOU) with Hung Lin Holding to sell the stake for $4.2m.

The company in a media release asserted that market sentiment remains tepid for non-ferrous metals amid the ongoing global economic uncertainties, and economic growth is is waning in China, one of the biggest consumers and producers of non-ferrous metals. GKE further noted that with current depressed market conditions, it is probable that metal prices will stay on the downtrend.

Given the gloomy outlook on non-ferrous metals, GKE has decided to free up resources to better focus on expanding in strategic business opportunities, said Neo Cheow Hui, GKE CEO and Executive Director.

The sale of the stake is conditional upon various other requirements that include the approval of LD Commodities Metal Asia, a subsidiary of Louis Dreyfus Commodities, which had nabbed a 51% stake in GKEML for about $8m in 2012.

“The latest unaudited consolidated net tangible asset (NTA) and the net book value (“NAV”) of the 49% stake in GKEML as at 30 November 2015 were approximately S$2.5 million and S$7.6 million, respectively. The Proposed Sale would result in a net gain of approximately S$1.7 million over the NTA and a net loss of approximately S$3.4 million over the NAV,” the release stated.

Neo reasoned that the potential net loss stems mainly from the impairment of assets as the commodities market deteriorated over the past year. He stated that the net loss will be a non-cash charge to GKE, and the $4.2m proceeds from the stake sale will boost the company’s cash balance.