KUALA LUMPUR (July 17): Lotus Circular Bhd (KL:LOTUSCIR), which sells leather products and recycles waste, has proposed to sell its 55% stake in Miroza Leather (M) Sdn Bhd, its largest profit and revenue contributor, for RM38 million cash, exiting the leather retail business at a loss.

In a filing with Bursa Malaysia, the company said if the disposal is completed by the fourth quarter of this year, it will result in a pro forma loss of RM15.39 million for the company, based on Lotus Circular’s audited consolidated financial statements for the financial year 2025 (FY2025).

The disposal is expected to result in a loss per share impact of approximately 5.11 sen, based on Lotus Circular’s existing issued share capital of 300.89 million shares, according to the filing.

The sale price is at the higher end of the fair market value range of RM33.34 million to RM40.11 million, as appraised by Sierac Corporate Advisers Sdn Bhd.

The company’s retail business contributed 83% of the RM10.2 million net profit recorded by the group for the nine-month period ended March 31, 2026. It also accounted for 72% of the RM153.5 million revenue generated during the same period.

In the exchange filing, Lotus Circular said the divestment would allow it to redirect its financial and management resources towards its recycling operations, its second-largest profit and revenue contributor, which accounts for about 30% of the group’s profit and revenue.

Lotus Circular has entered into a conditional share sale agreement with Trend Navigator Sdn Bhd, a company owned by two individuals, Siow Sea Nen and Chen Mui Yong. Siow holds a 99% stake in Trend Navigator.

The company said the proposed disposal takes into account the 32-year-old company’s declining profitability over the past three financial years, with profit after tax (PAT) falling from RM13.17 million in FYE June 30, 2023 to RM3.68 million in FYE June 30, 2025 amid a challenging retail environment.

Miroza Leather engages customers through five retail stores and 539 consignment counters nationwide and carries international names such as Pierre Cardin, Alain Delon, Crocodile and Ducati.

The board said it believes it is timely to divest Miroza Leather and redirect the group’s financial and management resources towards its recycling business, which offers stronger growth potential and greater scalability.

Lotus Circular said it plans to use the bulk of the RM38 million proceeds for working capital requirements, with RM37.38 million allocated for operating expenses and payment to trade creditors. The remaining RM620,000 will be used to cover expenses related to the disposal.

The transaction is subject to approval from the group’s shareholders at an extraordinary general meeting (EGM), as well as other relevant approvals, if required.

KAF Investment Bank has been appointed as adviser for the transaction.

Shares of Lotus Circular fell three sen or 9.5% to close at 28.5 sen on Friday, giving the group a market capitalisation of RM85.8 million.