KUALA LUMPUR, Malaysia (July 5): Chin Hin Group Property Bhd (CHGP) intends to pay RM37.95 million for a 65 percent stake in construction firm Kayangan Kemas Sdn Bhd. To complement its property development industry, it has also considered diversifying into construction. Based on a conditional share sale agreement between CHGP and Kayangan Kemas’ shareholders Chan Kin Keong and Khor Chee Yong, CHGP expects to pay for the acquisition with cash (RM29.15 million) and the issuing of 11 million additional CHGP shares at an issue price of 80 sen each.
According to a bourse filing, CHGP plans to fund the cash component using internal funds, fund raising, or a mix of the two, with the proportions to be established later after taking into account CHGP’s gearing level, interest costs, and cash reserves.
Kayangan Kemas, according to CHGP, is a Grade 7 contractor with the Construction Industry Development Board who specializes in specialized buildings. The latter has executed projects worth more than RM1 billion in Malaysia, with clients ranging from private property owners/developers to several government agencies, including the Malaysian Ministry of Works.
According to CHGP, the company’s current projects include hospital construction and upgrades (such as Miri Hospital and Tanah Merah Hospital) as well as community hall and administrative complex building for Kuala Lumpur City Hall, with a total contract value of more than RM500 million.
Kayangan Kemas recorded a profit after tax of RM5.75 million for the fiscal year ending December 31, 2020.
CHGP stated it will merge Kayangan Emas’ financial performance into the group once the proposed share buy is completed, which may account for more than 25% of the company’s future net profit. “As a result,” it stated, “the board wants to seek shareholder permission to diversify the group’s existing activities to include the supply of construction services.”
The plans will give the organization indirect access to Kayangan Kemas’ current and future initiatives. “The proposals are likely to result in synergistic benefits because both CHGP and Kayangan Kemas operate in and service the same industry, namely the real estate business,” it stated.
The ideas will also allow CHGP to get into the construction market and develop its own in-house construction team, which will help the company in the long run, according to the company.
“Based on the foregoing, and considering Kayangan Kemas’ established business and strong previous financial performance, the board anticipates that the proposals will contribute favourably to the group’s future earnings,” it stated.
CHGP’s stock fell 0.5 sen today, or 0.62 percent, to 80 sen, valuing the company at RM280.74 million./n
