An announcement has been issued by OCT (ASIA) (03366) regarding its subsidiary's intention to sell its entire equity interest in OCT (Huizhou).

The seller, which is the company's indirectly wholly-owned subsidiary, plans to conduct the sale via a public listing on the Shenzhen United Assets and Equity Exchange.

The target company is primarily engaged in factory leasing and property management and is the sole registered owner of an industrial park property located in Huizhou, China.

Rationale for the Divestment

This proposed transaction aligns with the group's strategic initiative to optimize its business structure and enhance asset efficiency.

If completed, the sale would allow the group to monetize existing assets and reallocate resources towards maintaining and developing its core operations.

Financial Implications

The transaction is anticipated to generate cash proceeds of no less than approximately RMB 296 million, with an estimated net gain of at least RMB 145 million.

These proceeds would be utilized to reduce the group's interest-bearing debt, thereby strengthening its financial position.

Risk Management Considerations

The sale would also mitigate business risks associated with the target company, which is facing increased operational pressure and competition due to a growing supply of surrounding industrial parks.

Enhancing the target company's competitiveness by expanding its leasable or salable area would require a capital injection estimated at no less than RMB 300 million, in addition to funds needed for facility upgrades.

Continuing with property construction investments would tie up further capital with potentially long recovery periods.

Therefore, the divestment enables the group to recoup its initial investment and avoid further capital being locked in.