KUALA LUMPUR (May 3): T7 Global Bhd, an oil and gas products and services provider, has proposed to diversify its business into the aerospace industry as part of its strategy to enhance its earnings stream, while reducing the dependency on the oil and gas sector.

T7 Global said in a Bursa Malaysia filing today that the foray into the new industry was on the back of a positive outlook and prospects of the aerospace industry, in which the firm intends to ride on the government’s national strategies, such as the Entry-Point-Project of the Economic Transformation Program and the Malaysian Aerospace Industry Blueprint 2030.

“The new business and proposed diversification are expected to provide T7 Global with an additional stream of income, thus improving the consolidated earnings of the group as a whole, when the new business commences,” the filing added.

“On that account, T7 Global would be able to mitigate its reliance on the oil and gas sector and to diversify into new areas and viable businesses, as part of a long term strategic plan, moving forward,” the Main Market-listed firm said.

According to T7 Global, the foray into the new business will be via T7 Kilgour Sdn Bhd, in which it has a 60% stake via T7 Aero Sdn Bhd. The remaining 40% is held via KOV Ltd.

On May 9, 2017, T7 Global via T7 Aero, inked a joint-venture agreement with KOV to set up a specialised metal treatment plant which will provide non-destructive testing, passivation of steels, chromic acid anodising, aluminium etching, tartaric acid anodising and chrome-planting for aerospace parts to aerospace parts manufacturers.

T7 Global said cost to establish the metal treatment plant in Serendah, Selangor, amounted to RM30 million.

“The construction for the specialised metal treatment plant had begun in February and is expected to be completed by end of 2018,” T7 Global said.

The plant is expected to kickstart operations by the first quarter of 2019, the firm added.

T7 Global said T7 Kilgour has currently received 10 requests for quotation, amounting to approximately RM35 million, from various aerospace parts' manufacturers. 

Once the plant commences its operation, the new business would provide for an additional income stream and could contribute 25% or more to the net profit, which should improve its future consolidated earnings, the filing added.

To fund for the construction of the new metal treatment plant, T7 Global has also proposed to raise between RM35.03 million and RM38.76 million via a private placement exercise.

In the same announcement, T7 Global said it intends to place out up to 92.28 million of new shares, which is equivalent to 20% of issued shares, to selected investors.  

T7 Global also announced another proposal for a share buy-back of up to 10% of issued shares, which may stabilise the supply and demand of the company’s traded securities on Bursa Malaysia.

In order to complete all of its proposals, the firm said it will seek approval from Bursa Malaysia, as well as T7 Global's shareholders at an extraordinary general meeting to be convened later. 

Having considered all aspects of the proposals, which include the rationale and justification, the utilisation of proceeds and the effects of the private placement exercise, T7 Global said its board of directors is of the opinion that the proposals are in the company’s best interest. 

T7 Global expects to complete the proposals, which is advised and facilitated by UOB Kay Hian Securities (M) Sdn Bhd, by the third quarter of 2018.

At noon-break, T7 Global shares dropped 0.5 sen or 1.09% and paused at 45.5 sen, valuing it at a market capitalisation of RM190.85 million.