KUALA LUMPUR (Dec 31): Hextar Retail Bhd (KL:HEXRTL), formerly known as Classic Scenic Bhd, has terminated an agreement to acquire a 51% stake in a shoes and clothing company Redina Malaysia Sdn Bhd for RM35.7 million cash.
The Rawang-based wooden picture frame mouldings manufacturer said it had issued the termination notice to the seller, Perdanis Distribution (M) Sdn Bhd.
The termination was due to Redina’s unaudited loss after tax recorded for the nine-month period ended Sept 30, 2024, Hextar Retail said in a bourse filing on Tuesday. "Redina confirmed that it is unlikely to attain the guaranteed PAT (profit after tax) for the first year of the guaranteed period,” it added.
The acquisition, initially comes with a total profit guarantee of RM12 million for two years — from Jan 1, 2024 to Dec 31, 2025 — which was supposed to provide Hextar Retail with an additional income stream in the near term.
Under the share sale agreement inked in December 2023, Hextar Retail has the right to terminate the acquisition of the second tranche (the remaining 31% stake in Redina for RM21.7 million), and require Perdanis to repurchase the first tranche (a 20% stake in Redina for RM14 million) from Hextar Retail within 24 months of the termination notice.
The Main Market-listed company said the termination will not have any material effect on its earnings for the financial year ending Dec 31, 2024, and is in the company's best interest.
Redina specialises in importing and distributing a diverse range of goods, including shoes, clothing and articles, focusing on apparel and undergarments. They hold brand licences for renowned names such as Renoma, Jockey, Moto Guzzi, Alfa Romeo, Valentino Creations, Nautica, Crocodile, Arnold Palmer and Beverly Hills Polo Club.
Hextar Retail previously said that the stake purchase in Redina was part of the company’s plan to reduce its dependence on its existing wooden picture frame moulding business.
The group has recently expanded into the food and beverage (F&B) sector via its subsidiary Lim Ket Leng Marketing Sdn Bhd (LKLM) to boost its revenue streams.
Hextar Retail posted a net loss of RM1.89 million in the third quarter ended Sept 30, 2024 (3QFY2024), against a net profit of RM289,000 in the same quarter last year, mainly due to the foreign exchange losses and losses incurred by associated companies.
Revenue for the quarter rose 38.63% to RM13.85 million from RM9.99 million, on higher export volume of wooden picture frame mouldings and higher revenue from the retail segment.
Shares of Hextar Retail settled up half a sen or 1.09% to 46.5 sen on Tuesday, giving the group a market capitalisation of RM226.89 million.