- TheEdgeWeekly revealed that MWE Holdings would purchase a 22% stake in Kumpulan Europlus that would see the former emerging as K Euro’s largest shareholder.

- In a filing to Bursa Malaysia last Friday, MWE announced that it had entered into a share sale agreement with Tan Sri Chan Ah Chye and Sze Choon Holdings Sdn Bhd to acquire 115 mil K Euro shares for RM156mil or RM1.35/share.

- At RM1.35/share, the acquisition price represents a premium of 6.3% based on the volume weighted average price (VWAP) of RM1.27/share for the five trading days of K Euro prior to July 12, 2013.

- Prior to this, MWE had acquired 26 mil K Euro shares or a 5% stake on July 10 & 11 via a direct business transaction (DBT) for a combined RM30mil or RM1.14/share.

- After the deal, we estimate that MWE would surface as K Euro’s largest shareholder with a 27% stake, followed by IJM Corp at 23% stake.

- Meanwhile, Chan’s stake in K Euro would be pared down to ~4.5% from 26% previously. Chan was K Euro’s CEO and president before stepping down in April 2012.

- MWE is mainly involved in the manufacture and sale of garments. MWE’s substantial shareholder is Tan Sri Surin Upatkoon, which holds a 32% stake in the company. Surin – which was recently re-designated as chairman and director of Magnum Bhd following a 11-year stint as CEO – is also a non-independent, non executive director of MWE.

- Last year, MWE raised RM170mil from the disposal of lightning systems subsidiary Davex (M) Sdn Bhd – and another RM93mil through the sale of its entire plantation business to Survival Access Sdn Bhd.

- The latest move may raise prospects of seeing the West Coast Expressway (WCE) coming one step closer to kicking off after K Euro signed a concession agreement with the government last January under West Coast Expressway Sdn Bhd (WCE Sdn Bhd). K Euro owns an 80% stake in WCE Sdn Bhd, with IJM holding the balance 20%.

- To be sure, K Euro announced a private placement exercise of 52 mil new shares last Wednesday, where the gross proceeds of ~RM58mil is to be injected into WCE Sdn Bhd.

- We expect more newsflow on tenders for the construction packages of the RM6bil highway after WCE Sdn Bhd achieves financial closure for the project towards 4Q13.

- We continue to see IJM Corp as a leading contender for the construction works. The progress made on WCE, coupled with renewed acceleration of contract flows post-election, anchor our OVERWEIGHT stance on the construction sector.

Source: AmeSecurities