Olympia ... Jun10

As more details on the proposed disposal of Menara Oympia Industries Bhd surface, it appears that the company will end up with only RM11.37 million in net cash proceeds out of the total disposal price of RM200 million.

The actual amount OIB will eventually receive could turn out to be even much lower as a clause in the sale and purchase agreement allows the selling price to be adjusted for NAV changes before the sale is fully completed.

The buyer of property is Jelita Timur Sdn Bhd, which will also assume debts of RM172 million that are currently charged under Menara Olympia.

After ‘expenses’, OIB could end up with less than RM3 million and minority shareholders may be the biggest losers.

So why do the valuation, the selling price of the property as well as terms of the sale and purchase agreement appear unfavaourable to OIB?

Menera Olympia owns and manage by OIB’s subsidiary company Diary Maid Resort & Recreations Sdn Bhd (DMRR)

The valuation was derived from, among others the remaining tenure of 72 years for the leasehold building, the unexpired term of 15 years remaining for the leased car park, which belongs to the federal government, the location condition and etc … But the valuation in Jan 2010 is the same as that done at the height of the global financial crisis in August 2008. The company only engaged with one valuer and no open competitive bidding.

Of the total liabilities, of around RM172 million being charged to MEnara Olympia, only the redeemable term loans of RM52 million are direct debts held by DMRR. The balance of RM119 million are debt under OIB group that are charged under a third party.

Rental collection from the property seems rather low, going by the stated net monthly income of RM1.26 million. OIB and its sister company, Dutaland Bhd are the main tenants of the building.

Former executive director of Ayer Hitam Tin Dredging Malaysia Bhd, Oh Beng Wah, is the largest shareholder of Jelita Timur with a 49% stake. He has a link to Duta Yap, having worked for the Duta group of the Melaka Raya project back in 1979.

OIB’s original cost of investment in DMRR was rm88.64 million in 1996. Getting a mere return of just RM3 million for 16 years investment.