HG Metal subsidiary to buy industrial property in Tuas for S$20.8 million

[SINGAPORE] A unit of steel distributor HG Metal Manufacturing has exercised an option to purchase (OTP) to acquire an industrial property in Tuas for S$20.8 million, a move that will more than double the group’s land area, the mainboard-listed company said in a statement on Tuesday (Dec 16).

HG Construction Steel, the company’s wholly owned subsidiary, was granted the OTP by Hai Leck Engineering, with the price for the leasehold property at 47 Tuas View Circuit arrived at on a “willing-buyer, willing-seller basis”, HG Metal said.

The group noted that an independent valuation report it had commissioned pegged the property at S$19 million on an “as-is basis”.

The proposed acquisition will be funded through a combination of internal resources, bank borrowings and net proceeds previously raised from the group’s rights issue and share placement exercises.

Following an initial payment with the exercise of the OTP, the group will pay the balance 95 per cent upon the legal completion of the sale and purchase of the property.

This will take place two weeks from the date of JTC Corporation’s approval of the transaction.

The property has a tenure of 30 years that commenced from Dec 15, 2007; about 12 years are left.

It comprises a three-storey ancillary office building, two three-storey production buildings and a single-storey, single-user industrial development comprising two factories. The land area is about 24,163.8 square metres (sq m).

“The acquisition of the new site will enhance our operational footprint and strengthen the foundations for our next phase of growth,” said Xiao Xia, executive director and chief executive officer of HG Metal.

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“It gives us the scale and flexibility to support more projects and capitalise on favourable steel prices to optimise our inventory as needed to deliver competitive solutions to our customers in Singapore and the region,” she added.

HG Metal said the group intends to use the property to expand its production facilities and capabilities, as well as to increase storage capacity.

The company noted that it can use the existing plant and equipment in its ordinary course of business, as well as to support the expansion of other value-added services.

HG Metal’s current facilities at 28 Jalan Buroh, with a land area of 22,017.9 sq m, are already operating near full capacity, it added, “limiting the group’s ability to scale and meet growing customer demand”.

This comes as construction demand is set to grow in the next three years, the company said. The property would thus provide the space for growth, enhance operational efficiency and enable the introduction of “additional value-added services without significant additional investment”.

HG Metal shares closed flat at S$0.49 on Wednesday.