KUALA LUMPUR (Dec 1): Kumpulan Perangsang Selangor Bhd (KPS) via its wholly owned unit Perangsang Dinamik Sdn Bhd (PDSB) is acquiring the entire stake in computer numerical control (CNC) machining company MDS Advance Sdn Bhd for RM85 million.

The purchase consideration of RM85 million values MDS Advance within the industry benchmark in terms of enterprise value to earnings before interest, tax, depreciation and amortisation (EV/Ebitda) ratio of 7.9 times, which will be fully satisfied by internally generated funds.

PDSB had on Thursday (Dec 1) signed a conditional share sale agreement with the vendors Gan Lian Ban and Chuah Mooi Kheng. MDS Advance will become KPS’ indirect wholly owned subsidiary upon completion of the proposed acquisition.

MDS Advance is involved in a high-precision CNC metal machining business, which involves metal cutting and milling. Its operations are spearheaded by its founder Gan.

KPS managing director/group chief executive officer Ahmad Fariz Hassan said the acquisition would further strengthen the group’s core manufacturing business to move towards higher margin products, in line with long-term business strategy for sustainable growth.

“The transaction fits well with KPS’ investment criteria. Firstly, MDS Advance serves mature and non-cyclical industries that have been growing with population, consumerism trends and income growth. Furthermore, 90% of its revenue stream has been supported by long-term customers,” he said in a statement on Thursday (Dec 1).

“Secondly, it is profitable and cash-generating, consistently generating strong Ebitda and double-digit PAT [profit after tax] margins even amidst the challenging market conditions in recent years.

“Thirdly, MDS Advance will be a strategic addition to KPS’ current portfolio, which comprises subsidiaries involved in injection moulding and EMS [electronic manufacturing services] businesses,” Ahmad Fariz added.

KPS posted a 29.52% decline in its net profit for the nine-month period ended Sept 30, 2022 (9MFY2022), despite revenue increasing by 4.56%.

Its net profit for 9MFY2022 fell to RM27 million from RM38.3 million a year earlier amid lower contribution from Toyoplas Manufacturing (Malaysia) Sdn Bhd and associates, while revenue rose to RM1.04 billion from RM992.24 million fuelled by trading and licensing business.

At Thursday’s noon break, shares of KPS settled up half a sen to 78 sen, with a market capitalisation of RM419.16 million.