KUALA LUMPUR (Mar 17): Takaso Resources Bhd’s proposed related party transaction (RPT) to diversify into the construction business has been deemed “fair and reasonable” by its independent adviser DWA Advisory Sdn Bhd.
DWA Advisory is advising Takaso minority shareholders to vote in favour of the proposed RPT at the forthcoming extraordinary general meeting (EGM) on April 2.
In a circular filed by Takaso with Bursa Malaysia this evening, DWA Advisory said the proposed venture into construction was expected to contribute 25% or more to Takaso’s net profit in the future.
According to Rule 10.13(1) of Bursa Malaysia’s Listing Requirements, a listed issuer must obtain approval from shareholders if the new business diversification is expected to impact 25% or more of its net assets, or contributes 25% or more to the net profit.
Takaso’s wholly-owned subsidiary Takaso Land Sdn Bhd had on Jan 12, 2015 received a letter of award from OCR Land Holdings Sdn Bhd to construct a 21-floor commercial building in Jalan Kuching, Kuala Lumpur for RM37.44 million.
Takaso expects the construction contract to contribute 9% to its gross profit margin.
OCR Land is owned by Ong Kah Hoe, who also holds a 27.53% stake in Takaso, of which 13.81% are held via OCR Land.
The transactions are deemed RPT as he is also Takaso’s non-independent, non-executive director as well as a shareholder in OCR Land.
Takaso (fundamental: 1.25; valuation: 0.3) said its venture into the construction business is part of its strategy to reduce dependency on its existing business as well as improving its financial health. Takaso has been in the red since financial year ended July 31, 2012 (FY12).
“Our board believes that the proposed diversification would contribute positively to our group’s future earnings and improve the financial position of our group via the additional revenue and earnings contribution from the construction activities,” Takaso said.
It will also continue to focus on its existing businesses in the manufacture of rubber and baby products, as well as trading in baby apparels, infant milk and toiletries, recycling, and trading of general, electrical and mechanical products.
“Nevertheless, our group will from time to time review the business strategically, and where appropriate, implement the necessary changes to the corporate structure with a view to strengthen and grow our business,” said Takaso.
Takaso shares closed up 1.08% at 47 sen today, for a market capitalisation of RM94.83 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)