Memtech has entered into a sale and purchase agreement to sell its Huzhou City factory facilities for RMB 41.0m (~S$8.6m), inclusive of value-added taxes. The disposal would result in a net gain of RMB 21.7m and is expected to increase its FY15 NTA per share by 3% to 119.0 S cents.

We view the disposal as a positive development which will allow the group to redeploy capital locked up in under-utilized assets. The excess funds can then be used to the expansion of its core business in its remaining factories, such as for the purchase of equipment needed for newly signed projects.

Against its latest traded price of S$0.63, we maintain BUY on Memtech with fair value of S$0.76.

Source: OCBC Research - 3 Jan 2017