Strength-5

⚡ Flash Summary

Mahmood Textile Mills Limited (MEHT) has announced a de-merger of its apparel unit, transferring it to MG Apparel Limited. This decision, sanctioned by the Lahore High Court, aims to reconstruct MEHT by separating the apparel business. The de-merger involves transferring assets, rights, and liabilities related to the apparel unit to MG Apparel, with an effective date of January 1, 2025. MEHT will receive 30 million fully paid-up shares of MG Apparel, valued at PKR 87.985 per share, as consideration.

📌 Key Takeaways

• court approved the demerger of the apparel unit from Mahmood Textile Mills Limited (MEHT) to MG Apparel Limited on December 3, 2025. ⚖️
• The effective date for the demerger is set for January 1, 2025, indicating a retroactive application of the arrangement. 🗓️
• MEHT will receive 30 million fully paid-up shares of MG Apparel as consideration for the transferred assets and undertakings. 💰
• The value of the shares is PKR 87.985 per share, inclusive of a share premium of PKR 77.985. 📈
• The authorized share capital of MEHT remains at PKR 500,000,000, divided into 50,000,000 ordinary shares of PKR 10 each. 🏦
• The issued, subscribed, and paid-up capital of MEHT remains at PKR 300,000,000, divided into 30,000,000 ordinary shares of PKR 10 each. 📊
• MG Apparel’s authorized share capital is PKR 10,000,000, divided into 1,000,000 ordinary shares of PKR 10 each. 🏢
• MG Apparel’s issued, subscribed, and paid-up capital is PKR 10,000, divided into 1,000 ordinary shares of PKR 10 each. 🧾
• The net asset value (NAV) of the transferred assets and undertakings amounts to PKR 3,587,062,617. 💎
• The transfer includes land, plant, machinery, inventory, and other assets related to the apparel business. 🏭
• All employees of MEHT’s apparel business will be transferred to MG Apparel on the same terms and conditions. 🧑‍💼
• Long-term loans of MEHT amounting to PKR 2,030,521,387 will be transferred to MG Apparel. 🏦
• MG Apparel will record a share premium of PKR 2,339,559,771 in its books, related to this transaction. 📚
• MEHT will function as a holding company, allowing MG Apparel to operate independently. ⬆️
• A revaluation surplus of PKR 947,502,846 pertaining to property, plant, and equipment will be incorporated into MG Apparel’s financial statements. 🏢

🎯 Investment Thesis

HOLD. While the de-merger may unlock value in the long term, the immediate impact on MEHT’s share price is uncertain. The success of MG Apparel as a separate entity is also a key factor. Until there is more clarity on the operational performance of both MEHT and MG Apparel post-de-merger, a HOLD recommendation is appropriate. A price target will be re-evaluated in six months based on the company’s financial performance.