classita

HONG SENG Consolidated Bhd has told Bursa Malaysia that its decision to dispose of its 32.61% stake in Classita Holdings Bhd, just two years after buying in, was driven by the longer gestation period needed for the property development and construction projects, alongside the desire to realise immediate cash proceeds and redeploy funds into existing and new businesses.

The company was responding to a Bursa query regarding the disposal, which comes after Hong Seng’s July 14 and July 23, 2023 announcements of the acquisition, then touted as having “promising potential in, among others, the undergarments manufacturing and property development and construction businesses.”

For the audited period ended June 30, 2024, Classita posted a net loss of RM3.02 million, of which Hong Seng’s share was RM763,000.

Net assets stood at RM189.28 million, with Hong Seng’s portion amounting to RM62.26 million.

For the nine months to March 31, 2025, Classita recorded a net profit of RM676,000.

Segmental revenue for the group fell from RM75.83 million in the 15-month period to June 30, 2022, to RM50.49 million in FY2024, due mainly to a slump in manufacturing sales and direct retail.

Manufacturing revenue slid from RM70.46 million to RM45.77 million over the period, hurt by shifting consumer preferences, heightened competition from fast fashion and direct-to-consumer brands, and higher shipment costs from a shift to air freight to meet delivery schedules.

Direct selling and retail revenue plunged from RM5.3 million to just RM18,230 over the same period, as Classita pivoted away from in-house brands towards other segments.

The property development and construction segment, meanwhile, swung from nil revenue in FY2023 – due to the reversal of prior years’ sales after property buyers failed to secure financing – to RM4.65 million in FY2024, but still posted a loss.

In the nine months to March 31, 2025, Classita’s revenue improved by RM8.96 million year-on-year, thanks to higher manufacturing export sales to Germany, Turkey and the US, as well as slightly higher property sales.

Hong Seng said: “While the prospects of Classita’s businesses remain, Hong Seng has recognised a partial impairment of the investment based on a value-in-use calculation… considering the longer gestation periods required for the property development and construction projects to materialise.”

The impairment of RM34.52 million was derived under MFRS 136, using a five-year cash flow projection for the manufacturing segment only, discounted at 8.16%.

The property and construction segments were excluded due to the inability to reliably estimate near-term cash flows.

“Retaining the investment would require a longer timeframe before the Group could recoup the investment and generate returns, with such returns being subject to various market and business risks and uncertainties,” Hong Seng said.

“The disposal represents a more favourable option to divest, realise immediate cash proceeds, and sidestep potential risks,” it added.

Proceeds from the disposal will be channelled into Hong Seng’s existing businesses, future expansions and prospective ventures. — TMR