K Seng Seng funds stake buy in four firms via share placement

KUALA LUMPUR (Feb 22): K Seng Seng Corp Bhd (KSSC) is acquiring 51% stake each in four private companies for RM19.12 million cash that it will raise via a private placement.

The manufacturer and trader of stainless steel products has proposed to raise up to RM22.41 million from the private placement to expand its production in the metal-related industry.

KSSC’s share price staged a rally since November last year. The stock climbed from 65 sen at end-October to a high of RM1.65 in January. It closed at RM1.47 on Wednesday (Feb 22), valuing the group at RM190.8 million.

The placement entails the issuance of up to 17.28 million new shares — representing 10% of KSSC issued shares — to independent investors, it wrote in a Bursa Malaysia filing on Wednesday (Feb 22).

The group said the assumed issue price of RM1.40 each represents a discount of 8.9% to the five-day volume weighted average market price of KSSC shares up to the latest practicable date, of RM1.54.

KSSC said the private placement is expected to be completed within two months and the acquisition within three months.

The group on Wednesday entered into a term sheet with vendor Low Kim Yoong for acquiring the four companies, namely Metalmach Micro Technology Sdn Bhd, Toong Soon Micron Sdn Bhd, Senshin Seimitsu Sdn Bhd and BLU Resources Sdn Bhd.

It stated that any shortfall from the proceeds of the private placement will be funded through internally generated funds and/or bank borrowings.

“The proposed acquisitions will mitigate KSSC’s risk of over dependence on the current business by venturing into precision moulding business which produces higher value metal related products that yield better profit margin,” it said.

“This will in turn provide the group with a profitable recurring income stream and it is expected to improve the group’s profit and provide better earnings visibility over the long term to strengthen the financial position of the company.”