Monday, 3 July 2017

(The Star) Gabungan AQRS plans to acquire Monolight for RM26mil

PETALING JAYA: Construction and property development firm Gabungan AQRS Bhd is acquiring an industrialised building system (IBS) company that is majority owned by Nirvana Asia Ltd founder Tan Sri Kong Hon Kong, to be paid in Gabungan shares.

According to a filing with Bursa Malaysia last Friday, the total purchase consideration for Monolight IBS Building System Sdn Bhd, which amounts to RM26.02mil, will be satisfied entirely through an issuance of 19.56 million new ordinary shares in Gabungan at an issue price of RM1.33 per share.

The issue price of RM1.33 per share represents a 5.67% discount to the five-day volume weighted average market price of Gabungan shares, up to and including the last full trading day for Gabungan shares prior to the execution of the share sale agreement.

Monolight is the appointed contractor for a PR1MA housing development in Kuala Kuantan, Pahang, which is priced at a contract sum of RM424.23mil.

Gabungan has a joint venture agreement with Monolight to construct and develop the PR1MA Kuala Kuantan mixed development comprising 2,186 housing accommodations and 36 retail units.

In this joint venture, Monolight has a 51% stake while Gabungan owns the remaining 49%.

Hence, following the completion of the proposed acquisition, Monolight will be a wholly-owned subsidiary of Gabungan.

The announcement said that apart from gaining full control of the PR1MA Kuala Kuantan project, Gabungan would be able to recognise some RM35mil cash from this project over the next two years, which represents Monolight’s share portion of the construction contract value.

Splendid Forte Sdn Bhd, an investment holding company that is 98%-owned by Kong, is the largest shareholder in Monolight with a 66.12% stake.

In addition, Kong owns 5.11% equity in Monolight.

Besides that, Gabungan has also proposed to issue up to 35.47 million shares, or 6.45% of the group’s total number of enlarged issued shares, for a private placement.

The actual number of placement shares, that will be placed out to third party investors, will depend on the total number of issued shares on a date to be determined and announced later.

Based on the indicative issue price of RM1.26 per placement share, Gabungan aimed to raise gross proceeds of between RM24.54mil and RM44.7mil, based on a minimum and maximum scenario, respectively.

The bulk of the proceeds from the private placement would be utilised for working capital, which would enable Gabungan to part-finance its ongoing construction projects – PR1MA Kuala Kuantan, Sungai Besi-Ulu Kelang highway, and Pusat Pentadbiran Sultan Ahmad Shah.

The move is seen as another milestone and part of Gabungan’s transformation plan by group CEO Datuk Azizan Jaafar.

Recall that Azizan took helm of the then loss-making Gabungan and secured projects for its property and construction divisions.

Gabungan reported a loss of RM9.67mil for the financial year ended Dec 31, 2015 (FY15) and returned to the black with a net profit of RM22.63mil in FY16.

According to the announcement, Gabungan will be able to conserve its cash reserves by satisfying the purchase consideration of Monolight entirely by way of issuance of new Gabungan shares, as no cash will be paid for the proposed acquisition.

According to the latest quarterly results for the quarter ended March 31, 2017, the company has negative cash-in-hand amounting to RM78.34mil.

“Furthermore, proceeds arising from the proposed private placement will strengthen and conserve Gabungan’s existing cash reserve to meet the financing requirements of its current order book as well as anticipated new contracts.

“This will also reduce Gabungan’s requirement to take on new project financing loans and improve its cash flow,” it said.