KUALA LUMPUR: An emerging major shareholder has offered a US$69.3 million (RM282.74 million) construction contract to help turn Versatile Creative Bhd around — which sounds like good news to the latter’s shareholders.
The job is to construct a halal vaccine plant, together with a pharmaceutical plant and research centre in Bandar Enstek Industrial Park, Negeri Sembilan.
Versatile announced in May it received an offer letter from Oriental Mace Sdn Bhd (OMSB) for the project, which it has yet to accept, pending further evaluation of the viability and feasibility of the project and its shareholders’ approval on the proposed diversification into construction.
The little-known OMSB is part of The Oriental Mace Group (OM), which is led by chief executive officer (CEO) Professor Dr Wong Kong Yew, formerly the CEO of Stone Master Corp Bhd, a company that is mainly involved in the manufacturing and trading of marble and granite, ceramic tiles, and sanitary wares.
The offer of the project to Versatile seemed curious at the time as the latter had no prior experience in construction. The Main Market-listed company is mainly involved in the manufacturing, and trading of paperboard packaging products.
After keeping investors guessing at what’s going on behind the scene, Wong announced on Aug 29 that he had inked a conditional share sale agreement with Versatile’s executive chairman Datuk Lee Kwee Hiang three days earlier to buy an 18.33% stake in Versatile at RM17.21 million, or 80 sen per share. The price tag is 27.9% lower than Versatile’s closing price of RM1.11 on Aug 26. The share sale is expected to be completed in 60 days.
Wong is keen to see Versatile diversify into construction by taking up the vaccine plant project.
“The construction business is not really something Versatile has never thought of. They have had a construction company earlier, though it was not active. Perhaps the timing was not right then,” Wong told The Edge Financial Daily in an interview.
Wong said the construction of the vaccine plant, which OM had started on, is now 30% completed. It is expected to be completed in January 2018 and start operating in the first quarter of 2018.
It is understood that the project would need some US$18 million for equipment financing alone.
Versatile’s cash and bank balances stood at only RM531,000 as at June 30, with total borrowings of RM17.11 million; gearing ratio, according to its 2016 annual report, stood at 61%. That means if it is to take up the project, Versatile will certainly have to borrow or raise funds for it.
“So far, OM had been funding the project. It is still early to say whether we will raise funds through Versatile if the project is injected into the company,” said the academic-turned-entrepreneur, who used to teach at local universities here.
When asked about the project’s profit margin, he only said: “We will only be able to disclose the details about the profits and margins of the contract, if we (Versatile) are having any rights issue,” he said.
It is learnt that OMSB was awarded the vaccine plant engineering procurement construction contract valued at some US$70 million via direct award. Saudi Arabia-based Al Jomaih Group is the project owner.
OM itself is about four years old and is a portfolio investment company that has ventured into biotechnology, hospitality and information technology business — the last mainly in application or app development. It also owns Malaysian Hospitality College.
“It doesn’t matter that we (OM) don’t have the expertise [in construction], as we are working with Al Jomaih Group. The project is under its subsidiary, AJ Biologics, and they have acquired a vaccine production plant in Denmark,” said Wong, who shared as he was previously a consultant to the Prime Minister’s Department.
“Injecting this project into Versatile does not mean we are replacing its existing business. The project is part of a plan to help the loss-making Versatile turnaround,” he added.
Versatile’s net loss narrowed to RM830,000 in the first quarter ended June 30, 2016, from RM2.24 million a year ago, mainly on lower administrative expenses. Revenue gained 9.9% to RM12.44 million from RM11.32 million. As at June 30, its accumulated losses stood at RM23.33 million.
Though the issue of whether there is a need for halal-certified vaccines or not remains a controversial one to some, Wong is upbeat on the outlook of the industry, and cited the tremendous success of halal-certified toothpastes as an example that there would be demand for such products.
“The Islamic market is huge, which means that the demand for halal-certified vaccine plants will be huge,” he added.
He urged Versatile shareholders to not only focus on this one vaccine plant project, but to consider the potential OM can bring to the company in the future, though he conceded that there is no partnership with Al Jomaih Group which would ensure the award of more such contracts to OM.
Shares of Versatile settled unchanged at RM1.12 on Friday, with a market capitalisation of RM131.42 million.