KUALA LUMPUR (July 23): Leather fashion products retailer MESB Bhd announced today that it is acquiring the entire equity interest of Active Fit Sdn Bhd, the designer and retailer of the "Jeep" apparel brand in Malaysia, for RM19 million cash.

In a filing with Bursa Malaysia, MESB said it has entered into a conditional share sale agreement (SSA) with Active Fit for the said acquisition.

MESB said the proposed acquisition will enable it to expand into the retailing of casual apparel and accessories, a segment within the retail fashion industry for which the group has experience and expertise.

Active Fit is principally involved in brand building, concept development, fashion designing, sourcing, marketing, distribution and retailing of casual apparel and accessories under the "Jeep" brand.

It operates more than 100 consignment counters in various departmental stores nationwide for the "Jeep" brand of apparel and accessories.

Active Fit is 95%-owned by Siow Sea Nen, while the remaining stake is owned by Chen Mui Yong. Both are Malaysians.

MESB said the proposed acquisition shall be financed by internally generated funds and/or bank borrowings, and — subject to shareholders and relevant regulatory approvals — it is expected to be completed by the fourth quarter of 2015.

The proposed buy comes with a profit guarantee from Siow and Chen, whereby Active Fit shall achieve an audited profit after tax of not less than RM2.5 million for the financial year ending June 30, 2016 (FY16).

For FY14, Active posted an audited profit after tax of RM2.47 million, on sales of RM33.59 million, while its nine-month period ended Mar 31, 2015 (9MFY15) has a net profit of RM2.28 million, backed by sales of RM22.04 million.

MESB, on the other hand, registered an unaudited net profit of RM1.25 million for its financial year ended Mar 31, 2015 (FY15), down 91.77% from RM15.2 million previously; revenue was at RM86.7 million, a 5% decline from RM91.25 million previously.

MESB (fundamental: 1.85; valuation: 1.1) was not traded today. It last closed at 90 sen, for a market capitalisation of RM37.8 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.)