Thursday 28 Mar 2024
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KUALA LUMPUR (March 6): Boustead Holdings Bhd is purchasing a 50% stake in Irat Properties Sdn Bhd for RM127.8 million, which will see it invested in the Malaysian government’s automated enforcement system project upon the completion of the stake acquisition.

In a filing with Bursa Malaysia today, Boustead (fundamental: 0.65, valuation: 1.8) said it is proposing to subscribe for 60 million new Irat shares, which represents 50% of the issued and paid-up ordinary share capital in Irat, for RM2.13 apiece.

The remaining 50% of the issued and paid-up ordinary share capital are held by the existing shareholders, namely Lembaga Tabung Angkatan Tentera (“LTAT”) and Irat Holdings Sdn Bhd.

LTAT is also subscribing for 550,000 redeemable convertible preference shares (“RCPS”) of RM0.01 par value each in Irat, at the issue price of RM100 per RCPS for RM55.5 million, said Boustead.

“Subsequent to the proposed subscription, Boustead and LTAT intend to have an eventual issued and paid-up share capital in Irat, where both Boustead and LTAT will be subscribing for such number of ordinary shares in Irat, with a view of having a joint control in Irat (proposed additional subscription),” said Boustead.

Boustead intends to fund the acquisition, as well as any proposed additional subscription, via internally-generated funds and/or borrowings.

The proposed acquisition of Irat shares is targeted to be completed by second quarter of this year.

Irat is an investment holding company with subsidiaries involved in property investment. It also owns 70% of Irat Hotels & Resorts Sdn Bhd. More importantly, Irat is in the midst of acquiring ATES Sdn Bhd and Beta Tegap Sdn Bhd, who are the joint-operators of AES.

On Feb 27, 2015, Irat entered into 2 conditional share sale and purchase agreements (SPAs) to fully acquire ATES — together with 210,000 Islamic Redeemable Non-cumulative Preference Shares in the share capital of ATES — and Beta Tegap. However, the price tags for both the acquisition of ATES and Beta Tegap have not been disclosed.

AES is an automated traffic enforcement system concession, which was awarded by the government to ATES and Beta Tegap on Dec 9 2011. AES and Beta Tegap are to establish and operate a network of AES to monitor all federal roads, highway and expressway in Malaysia under a build-operate-transfer (“BOT”) basis, for a concession period of 66 months.

However, the federal government abruptly took back the project from ATES and Beta Tegap in 2012, before the completion of the concession period, following backlash from the federal opposition and legal discrepancies in the summons issued.

Following that, ATES and Beta Tegap took up a case against Putrajaya at the Kuala Lumpur Regional Centre for Arbitration. The case is still on-going.

Meanwhile, Boustead said the stake buy in Irat will also allow it to expand its investment in the property sector, as well as the hospitality and tourism sector, as Irat owns two properties in the city centre, namely the Chulan Tower Office Block and The Royale Chulan Kuala Lumpur Hotel, collectively valued at a total of RM508 million.

Boustead closed down 4 sen or 0.86% at RM4.60, bringing its market capitalisation of RM4.8 billion.

(Notes: 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.)

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