KUALA LUMPUR (July 17): Pentamaster Corp Bhd plans to inject three of its automated solution subsidiaries into Pentamaster International Ltd (PIL), which it intends to list on the Hong Kong Stock Exchange.

The three wholly-owned subsidiaries are Pentamaster Technology (M) Sdn Bhd, Pentamaster Equipment Manufacturing Sdn Bhd and Pentamaster Instrumentation Sdn Bhd.

The three units will be injected into PIL for a collective RM86.78 million, which will be satisfied via the issuance of 999 PIL shares to Pentamaster.

"The internal reorganisation will facilitate a more efficient group structure by way of promoting a better segregation of business responsibilities and operations for Pentamaster’s existing automated solution business and its other smart control solution system business," said Pentamaster in a filing with Bursa Malaysia today.

"This will in turn enable the management of the automated solution business and smart control solution system business to efficiently allocate resources and focus on their respective businesses.

"In addition, the internal reorganisation will also facilitate PIL to act as the listing entity for the proposed listing," it added.

Following the internal reorganisation, Pentamaster will proceed to dispose of a 7.4% stake in PIL to Singapore-based private equity fund GEMS Opportunities Limited Partnership RM25.5 million.

The proposed disposal is expected to result in a gain on disposal of RM19.08 million.

Pentamaster said it intends to use the proceeds from the proposed disposal for expenses in relation to the proposed listing, to repay borrowings, for staff and other general administrative and operating related expenses and sales and marketing expenses.

The disposal consideration of RM25.5 million in PIL represents a price to earnings (PE) multiple of 10.4 times to the audited combined net profit of Pentamaster Technology, Pentamaster Equipment and Pentamaster Instrumentation of RM33.14 million for the financial year ended Dec 31, 2016.

The PE multiple falls within the range of the high (17.96 times) and low (6.45 times) of Pentamaster’s traded PE multiple for the past 12 months up to the date of this announcement.

Barring any unforeseen circumstances, the proposals are expected to be completed by the third quarter of 2017.

In June, Pentamaster announced that it is pursuing a separate listing for its automated solution business in Hong Kong.

Pentamaster shares closed down eight sen or 2.13% to RM3.68 today for a market capitalisation of RM539.37 million.