Hatten Land has announced that its wholly-owned subsidiary Prolific Revenue has on July 7 entered into a sale and purchase agreement (SPA) to sell land in Melaka for cash consideration of RM25.8 million ($8.3 million).

The leasehold vacant land measuring 3.781 hectares was originally slated to be developed into an integrated mixed development that will comprise a shopping mall, cineplex, convention hall and auditorium, meeting rooms, a hotel block and a serviced apartment block.

As of July 7, the project has yet to commence. Given the disposal, Hatten Land says it will no longer be proceeding with the project.

The land is being sold to Webest, a company owned by one Lim Fee Ching and Kan Oi Wah.

According to HattenLand, the disposal provides an avenue to raise funds to cater to the company’s financial needs. Sales proceeds will be utilised for general working capital purposes. 

The land carries a book value of RM28.5 million as of March 31. As a result of the disposal, Hatten Land expects to recognise a loss of RM2.7 million. 

Given the weak consumer sentiments and property market due to the ongoing Covid-19 situation in Malaysia, Hatten Land states it expects its FY2021 ended June financial performance to remain “challenged and lackluster”. 

To that end, the company views that notwithstanding the loss, the disposal is an opportunity to raise funds for its operations and repayment of borrowings in light of the current economic environment.

In addition, the company notes that the consideration, which took into account the completed sales of comparable lands located in the vicinity, is higher than the value of completed land sales in terms of price per square feet. 

Based on proforma financials as of FY2020, the disposal would result in a decrease in net tangible assets from 11.15 sen to 10.96 sen, and an increase in loss per share from 16.28 sen to 16.47 sen.

Shares in Hatten Land closed 0.1 cents or 4% lower at 2.4 cents on July 6.