KUALA LUMPUR (Aug 8): Seal Inc Bhd (KL:SEAL) said it is raising its shareholding in loss-making MSR Green Energy Sdn Bhd to 30% by acquiring an additional 10% for RM21 million.

Seal is acquiring a 7.1% stake in MSR from Ong Kah Hui for RM14.88 million and another 2.9% stake from Qiang Xiao Yu for RM6.11 million, according to the group's bourse filing on Thursday.

MSR is primarily involved in the installation and servicing of solar photovoltaic systems, renewable energy project management, consultancy, construction, and electrical works.

Seal said the purchase price was determined on a willing-buyer, willing-seller basis, taking into account MSR’s prospects, including the development of the green digital park and submitted tenders.

The group said it also received a guarantee from the sellers that MSR will achieve a cumulative profit after tax of at least RM21 million for the two-year period ending Dec 31, 2025 (FY2025).

MSR’s net loss narrowed to RM10.12 million in FY2022 from RM14.28 million in FY2021, with revenue rising 5.15% to RM8.92 million from RM8.49 million, according to Companies Commission of Malaysia data.

As of end-FY2022, MSR had retained losses of RM13.28 million and negative total equity of RM8.28 million.

Seal said it will fulfill the purchase consideration with a RM3 million refundable cash deposit and RM18 million through the issuance of new shares at 61 sen apiece, which represents a 9.8% discount to the five-day average market price as of Aug 7.

Seal disclosed that the stake purchase is a related party transaction as MSR is 40.8% owned by KVC Corp Sdn Bhd, which is linked to Seal’s 30.7% shareholder Aaron Chen Khai Voon.

Chen became a substantial shareholder in Seal in July 2023 by taking up a 16.43% stake via a private placement. Just over six months later, Seal announced it would subscribe to MSR shares in a RM15 million deal, raising its stake to 20%.

Seal has also been in the red for three consecutive quarters, posting a net loss of RM2.58 million for the third quarter ended March 31, 2024, compared with RM2.03 million a year earlier, despite revenue more than tripling to RM5.45 million from RM1.61 million.

This weaker bottom line performance was attributed to interest expenses from ongoing litigation, late delivery interest on reclamation land, and higher administrative costs due to increased business activities.

As of end-March, Seal had long-term borrowings of RM51.04 million and short-term borrowings of RM64.4 million, while cash and bank balances stood at RM14.34 million.

Seal’s shares closed 3.5 sen or 5.43% higher at 68 sen, giving the group a market capitalisation of RM285.8 million. The counter has risen by 65.9% since the beginning of the year.