KUALA LUMPUR (March 31): Boustead Heavy Industries Corp Bhd (KL:BHIC) is planning to dispose of a 26-acre leasehold land in Pulau Jerejak, Penang, which was previously used for the group’s shipbuilding operation, for RM28 million.

Karya Koperat Sdn Bhd, a unit of property firm Ark Resources Holdings Bhd (KL:ARK), is the buyer of the mixed industrial and building land, according to a bourse filing. BHIC will pocket a one-off gain of RM14.39 million from the disposal through its unit Boustead Penang Shipyard Sdn Bhd.

“The proposed disposal represents a timely opportunity for the BHIC group to unlock the value and monetise its investment in the subject properties, and at the same time provides the group with surplus cash flow arising from the disposal,” the group said.

The Pulau Jerejak land was previously used to support the group’s shipbuilding, ship repair and offshore fabrication activities. However, utilisation of the assets “declined significantly and subsequently ceased activities” after the completion of a topside fabrication project in October 2018, before ceasing entirely as market conditions weakened.

Pulau Jerejak is a small island in the Penang Strait, situated between the two bridges linking Penang Island and the mainland.

BHIC attributed the underutilisation of the land to the prolonged downturn in global oil prices, which weighed on Malaysia’s oil and gas sector and, by extension, the domestic shipbuilding and maintenance, repair and overhaul (MRO) industry.

The group added that the property is now largely idle, does not support its core operations, and has been reclassified as surplus, non-core assets.

BHIC has earmarked at least RM25.97 million from the disposal proceeds for general working capital, including the settlement of trade and other payables, maintenance of its MRO facilities, and administrative and operating expenses.

ARK Resources, in a separate filing, said the acquisition of the land is in line with its strategy to expand its land bank to support future development opportunities. The group intends to fund the purchase through a mix of internally generated funds and borrowings.

Shares in BHIC closed unchanged at 46 sen on Tuesday, giving it a market capitalisation of RM253.96 million. The stock has gained about 68% year to date.

Ark Resources’ shares also ended flat at 20 sen, valuing the company at RM19.41 million. The stock has declined more than 15% so far this year.