Exciting times for Komarkcorp

by **Cals** Sun 18 Oct 2015, 17:18

Saturday, 17 October 2015

Exciting times for Komarkcorp

By: YVONNE TAN

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Better position: Komarkcorp is in a better balance sheet position now than previously.

Its subsidiaries may be bought over by French group, leaving it to find a new core business
THE normally thinly-traded Komarkcorp Bhd, a product label manufacturer went straight on to investors’ radar on Thursday after it was announced that a French company had expressed interest in acquiring all of its operating subsidiaries including those overseas.
Trading volume in the counter ballooned by three times the norm , with over 1.5 million shares traded.
It seems that investors are chasing the stock on hopes that Autajon, a French-based manufacturer of folding cartons and labels which has expressed interest to buy into Komarkcorp’s subsidiaries, will boost the latter’s overall profile and financials.
On Tuesday, Komarkcorp told the stock exchange it had received a non-binding indication of interest from the French packaging and labelling company to acquire stakes in Komarkcorp’s operating subsidiaries.
Since the announcement, Komarkcorp’s stock has surged 28% to reach 52.5 sen, giving the company a market capitalisation of RM65.4mil.
At this price, it remains at a 41% discount to its net tangible assets or book value of 89 sen per share.
“They were the ones who approached us,” joint-group CEO and executive director Datuk Tan Kwe Hee says when asked how the idea of the business deal came about.
It is understood that Autajon currently does not have any exposure to the Asian region and could be looking to penetrate it via Komarkcorp whose markets include China, Singapore, Thailand, Indonesia, India and the Philippines.
Notably, as it is at a very early stage, no price indication has been given for the likelihood of a sale of Komarkcorp’s subsidiaries.
The company has been doing some kitchen-sinking over the past two years, Tan reveals in a telephone conversation with StarBizWeek and the company is in a better balance sheet position now than previously.
However, based on its latest quarterly results, its cash and bank balances remain lower at RM10.1mil compared to some RM53mil in loans.
Notably, the company also has property, plant and equipment worth RM127.9mil.
Komarkcorp’s earnings over the years have not been particularly growing.
As far back as 2001, it made a net profit of some RM5mil. The export-oriented company’s earnings growth was stumped after the Sept 11 attacks in the United States which affected the demand for consumer and industrial products globally which uses its labels.
For its most recent quarter ended July 31, Komarkcorp made a net profit of RM1.28mil on revenue of RM39.9mil compared with a net loss of RM1mil on sales of RM33.1mil for the same period, a year earlier.
Cash rich
“We can’t really say much at the moment as Autajon still has to do a due diligence on us and everything is very preliminary,” Tan says.
Autajon has indicated, according to Komarkcop, that the scope of the due diligence would include, among others, the financial, legal, tax, commercial, human resource and regulatory aspects of the operating subsidiary companies.
In a mid-day announcement to the stock exchange yesterday, Komarkcorp said that its board had deliberated on the matter and has agreed for Autajon to undertake a due diligence exercise pursuant to its intention to buy the operating subsidiaries.
In the event an offer for the subsidiaries is made, Komarkcorp will consider it.
“Like in any other business, when an offer is acceptable, we will study it,” Tan says.
Komarkcorp in its earlier announcement stresses that “the interest from Autajon is at an exploratory stage and there is no assurance that a definite offer will materialise”.
Assuming the deal takes off, it will likely go through the acquisition of assets and liability route which requires a minimum 75% acceptance level from shareholders.
If indeed the deal is completed, it is understood that the monies received for Komarkcorp’s operating subsidiaries would be injected into Komarkcorp, a holding company, which will then become a cash-rich company without a core business.
Under regulations, the company would then need to find a new core business within 12 months or distribute all the monies back to shareholders as dividends.
Komarkcorp did not pay any dividend in its last fiscal year.
On its website, Autajon says it intends to become “an European leader in the manufacture of both folding cartons and labels” and right now has locations in several countries in Europe and the US.
Autajon’s acquisition trail
Founded in 1964, Autajon’s products include folding cartons, rigid boxes, industrial labels, wine and spirit labels, shoulder boxes and labelling machines.
The company which has over 3,000 employees has customers in various industries such as perfumes and cosmetics, pharmaceutical, confectionery and food specialties, wine and spirits, and consumer goods industries globally.
Information on Autajon’s website also shows that the group has been on an acquisition trail in recent times.
Earlier this year, it completed acquisitions of Imprenta Moderna and Cograf, both Spain and Italian firms within its industry, respectively.
In 2014, it bought over the group Fincarta which is headquartered in Chieri, Italy and which is involved in the folding cartons market.
Autajon said then that as a result of the takeover, its turnover would exceed 500 million euros (RM2.37bil) for that year.
Recall, the last time Komarkcorp was in the limelight was in August 2013 when a boardroom fight within the company took place.
The two individuals who asked then for the company directors to be removed were Tan and Lim Pei Tiam.
Specifically, they had requested for company founder Koh Hong Muan – who was the group CEO – and his children to be removed from their executive positions.
At the same time, the duo had also asked for new appointments to the board, namely themselves, Tan Sri Ahmad Mohd Don and Datuk Yeow Wah Chin.
All these individuals including Lim have since been appointed to the board, with Ahmad Don being made chairman.
Koh and his two sons also remain on the board of directors with Koh holding the position of group chief executive officer.
Coincidentally, Yeow and Tan are both directors in construction firm Bina Puri Holdings Bhd.
Based on Komarkcorp’s latest annual report, Lim is the largest individual shareholder with a 12.53% stake, followed by Koh with a 8.23 stake and Tan, a 7.65% stake.
Founded more than three decades ago, Komarkcorp manufactures labels and stickers for industrial and consumer products. Its clients include multinational firms mostly in the Asian region.