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Stocks In Focus MY (Fututech, Sarawak Cable, VS Industry) – 09/02/15
Malaysia Daily Bulletin | 09 February 2015
By:

Fututech Fast Tracks Construction Plans Via RM380m Acquisition

  • Fututech announced the execution of a heads of agreement (HOA) with the firm’s major shareholders, Datuk Tee Eng Ho, Datin Toh Siew Chuon and Tee Eng Seng, to commence exclusive negotiations for the proposed acquisition of construction outfits, Kerjaya Prospek (M) and Permatang Bakti, for RM380 million.
  • The acquisition presents the group with an enlarged order book of RM2.3 billion and comes with a cumulative profit guarantee of RM150 million over three years. The proposed asset injection will be funded via the issuance of 280 million new shares at RM1.16 a piece (17 percent premium to Fututech’s net asset value of RM0.99) and the balance in cash.
  • The deal is aimed at fast tracking the growth of the company, allowing it to be recognised as a premium contractor which executes high-rise buildings. Thus, there is a need to expand it to a market capitalisation of beyond RM500 million, which will put it among the league of more sizeable construction players.

Significance: At its current market capitalisation of RM104.3 million, Fututech is languishing at the bottom quadrant of construction players. Hence, the group hopes that achieving a bigger size through the amalgamation exercise will enable it to secure bigger jobs and grow faster.

Sarawak Cable Powers Into Singapore And Australia

  • Sarawak Cable (SCB), which acquired Universal Cable (M) and Leader Cable Industry in December 2014 for RM210 million, views Singapore and Australia as its key markets to push for the export of its newly launched 275-kilovolt (kV) underground high-voltage power cables.
  • SCB sees a niche and sizeable market for the 275kV cables that are priced more than double of the 132kV cables, as demand for power increases. Universal Cable, now a wholly-owned subsidiary of the group, was the only firm in Asean with the capability to produce the 275kV underground high-voltage cables, which was a key consideration for its acquisition.
  • Post acquisition, SCB has emerged as Malaysia’s largest integrated manufacturer of power cables and conductors, with a market share of more than 50 percent. The firm is also mulling the possible acquisition of an Indonesian cable manufacturer to use as a base to expand its market and presence in the country, which it view has a high demand for 132kV cables.

Significance: Going forward, the group sees the Middle East’s market for underground and overhead transmission cables as an area it would further strengthen. SCB has also targeted cable sales of RM1 billion in 2015, with 80 percent catering to the domestic market and the other 20 percent for the export market.

VS Industry To Diversify Into Solar Business

  • VS Industry’s 54.1percent-owned Hong Kong-listed subsidiary, VS International Group, has proposed to acquire a 20 percent stake in Cadre Project Development Company for Rmb44 million (RM25.4 million), paving the way for VS to venture into the solar energy segment.
  • According to the group, Cadre is involved in the construction and development of a ground-based solar power plant in Liangcheng County, Inner Mongolia, which is expected to achieve on-grid connection in the second half of 2015.Under the conditions of the acquisition, VS is given an option to acquire the remaining 80 percent stake in Cadre.
  • The exposure to the solar energy industry will allow VS to explore the business potential in the value chain of the solar energy industry, such as manufacturing and assembling parts and modules required for solar power plants, using the group’s existing strengths and expertise.

Significance: The group is of the opinion that the acquisition will enable the group to diversify its income and asset base given it has been operating under an extremely challenging and competitive environment for its core business dealing in electronic and electrical products as well as plastic moulded components and parts.


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