Instacom to buy 35% stake in Neata Aluminium, proposes bonus issue

by **Cals** Fri 03 Oct 2014, 02:17

Business & Markets 2014

Written by Charlotte Chong of theedgemalaysia.com

Thursday, 02 October 2014 21:26

KUALA LUMPUR (Oct 2): ACE market-listed telecommunications service provider Instacom Group Bhd has proposed to acquire a 35% stake in Neata Aluminium (Malaysia) Sdn Bhd for RM58.8 million, to be fully satisfied by the issuance of 309.47 million new shares of 10 sen each in Instacom at an issue price of 19 sen apiece.
In a statement with Bursa Malaysia today, Instacom said it had entered into a conditional share sale agreement with Ooi Eng Kean, Nor Mohd Amin Shaharudin, Ang Li-Hann and Chia Kok Seng for the proposed acquisition of 1.4 million shares of RM1 each or 35% equity interest in Neata.
Neata is principally involved in the design and fabrication of aluminium structures while its subsidiary company, namely Vivocom Enterprise Sdn Bhd is principally involved in civil engineering and construction.
The agreement comes with a profit guarantee of at least RM34 million for the financial years ending Dec 31, 2015 and Dec 31, 2016 (RM17 million each year)
“This translates into an average profit after tax (PAT) of RM17 million per annum. Based on the above and the value accorded to 100% equity interest in Neata of approximately RM168 million, the purchase consideration represents a price-to-earnings multiple of 9.88 times,” said Instacom.
“Neata’s order book presently stands at a healthy RM237.34 million, which should provide earnings visibility up to April 2017, while Neata Group has also participated in project tenders with a total estimated value of approximately RM246.50 million,” it added.
In light of the acquisition, Instacom proposed a diversification of its existing principal activities and that of its subsidiaries to include aluminium design and fabrication, and civil engineering and construction businesses.
Its board anticipates that this diversification may contribute 25% or more of the net profits and/or result in a diversion of 25% or more of the net assets of Instacom Group in the future, the statement to the local exchange read.
Additionally, it also proposed a bonus issue of up to 210.68 million warrants C on the basis of one free warrant C for every five existing Instacom shares held on an entitlement date to be determined later. The exercise is reward the group’s shareholders “while potentially enhancing the company's capital base”.
Assuming the full exercise of the warrants, the maximum proceeds that can be raised by the company is about RM46.35 million, based on the indicative exercise price of 22 sen per warrant, it said.
The proceeds arising from the exercise of the warrants shall be utilised for the repayment of borrowings and working capital requirements of Instacom Group, it added.
Instacom said the warrants may be exercised at any time within five years, commencing on and including the date of issuance of the warrants. All the proposals are expected to be completed by the first quarter of 2015.