On 16 Oct 2015, after seeing GKE Corp garnering significant media attention upon entering into a sales and leaseback agreement with Viva Industrial Trust for GKE’s existing headquarters cum warehouse property located at 30 Pioneer Road, I wrote a write-up on GKE. (See here for my previous write-up)
Most of the updates outlined in my previous write-up have occurred, thus it is apt to provide an update on GKE’s upcoming developments in 4QFY16F (Financial year ends in May) and FY17F and beyond.
Gain of S$12m to be recognized in 4QFY16F
According to GKE’s announcement, the disposal of 30 Pioneer road was completed on 15 Apr 2016. With the disposal, GKE will receive S$45m in sales proceeds and book in an approximate gain amounting to S$12m. This is noteworthy on multiple fronts, viz.
a) With S$45m in sale proceeds, GKE cash will balloon to S$55.6m (assuming cash remains at S$10.6m as per 3QFY16). This cash hoard will prove useful for their redevelopment of 39 Benoi Road and future business opportunities and
b) The sale proceeds of S$45m are considerable vis-à-vis their market capitalization of S$55.7m.
Redevelopment of 39 Benoi Road expected to be completed by Mar 2018
According to GKE’s 1 Mar 2016 press release, GKE expects to complete the redevelopment of the Benoi Road by Mar 2018. With this redevelopment and expansion, GKE’s will double its warehousing space from 200,000 sq ft to 400,000 sq ft. In addition, there will be an open yard storage space of 130,000 sq ft. This should boost its warehousing and logistics business revenue in FY19F onwards.
GKE Metal Logistics may have asset impairment
On 1 Mar 2016, GKE announced that the Memorandum of Understanding with Hung Lin Holding Ltd to sell 49% of GKE Metal Logistics has lapsed. It is common knowledge that the non-ferrous market has deteriorated and I guess that there may be some impairment charge amounting to around S$3-4m in 4QFY16F. However, my guess is even with a possible impairment, it is unlikely to wipe out the whole gain on disposal of 30 Pioneer Road.
Ship chartering to commence meaningful contribution in FY17F
GKE announced on 15 Mar 2016 that it has secured a chartering contract of six months starting mid Apr 2016, with an option of additional six months for its liquefied gas carrier vessel. Inclusive of the six months’ option,…
