December 8, 2010

Penang Development Corporation sells its aquaculture business

Malaysia's Penang Development Corporation (PDC) has sold its stake in an unsuccessful aquaculture firm in its effort to do away with non-core businesses.

The company sold its 60% stake in PDC Aquaculture (PDCA) to joint-venture partner GST Seafood Suppliers (GST) for MYR1.3 million (US$414,000), making MYR265,000 (US$84,400) in profit. In contrast, its initial investment in PDCA was MYR1.035 million (US$329,600).

Payment will be come in four installments of MYR325,000 (US$103,500) for a three-year period.

As well as deciding to sell its equity, the PDC board has moved to lease its aquaculture location in Batu Kawan to GST for 15 years in a deal worth MYR3.1 million (US$987,195), according to Malaysian media.

This is all part of state development agency PDC's new strategy of Competency, Accountability and Transparency (CAT) management to maximise its use of assets, explained Penang Chief Minister, Lim Guan Eng.

"With the sale of PDCA, PDC has completely divested from the aquaculture business and is currently acting only as a landlord through the rental of the land to GST," he said. "Clearly, this restructuring exercise has topped the previous government's practice of venturing into activities that was not its core business."

"By not continuing into businesses that PDC has no expertise or experience with, this successful divestment and new corporate management has not only saved PDC money by not continuing to incur losses but also helped to gain profits," he added.

Established on 17 October 2005 with a paid-up capital of MYR 1.725 million (US$549,326), PDCA launched its aquaculture operations on 1 February 2006 on a 69 acre site in Batu Kawan owned by PDC. The land was rented to PDCA monthly for MYR3,308 (US$1,053) for a period of three years starting on 1 January 2007.

Since its incorporation, PDCA has been incurring losses. Based on its audited accounts for the year ended 31 December 2008, accumulated losses reached MYR761,333 (US$242,447) with a net tangible asset of MYR0.56 (US$0.18) per share.

PDC thus decided at a board meeting last February to sell its full stake in PDCA. GST, now whole owner of PDCA, has changed the company's name to GST Aquaculture (Batu Kawan).