KUALA LUMPUR (Feb 6): Construction outfit Fututech Bhd announced it had entered into a Heads of Agreement (HOA) to acquire Kerjaya Prospek (M) Sdn Bhd and Permatang Bakti Sdn Bhd from its major shareholders Datuk Tee Eng Ho, Datin Toh Siew Chuon and Tee Eng Seng for RM380 million, to be funded mostly by the issuance of new shares.

This confirmed the news by The Edge Financial Daily this morning, which said that Eng Ho planned to inject construction related-assets into the group worth over RM300 million.

“I have always wanted to build a sizeable construction flagship and I am optimistic that now is the right time to carry out the amalgamation exercise. The proposed injection, once concluded, will present Fututech Group with an enlarged construction order book of more than RM2.3 billion. It will contribute positively to the group’s future profitability,” Eng Ho said in a media statement this evening.

Eng Ho is currently Fututech executive chairman and controls about 72.18% stake in the company.

According to Fututech’s announcement, (fundamental: 2.55; valuation: 1.2) Eng Ho has provided an aggregate net profit guarantee of RM150 million for both Kerjaya Prospek and Permatang Bakti for the financial years ending Dec 31, 2015 (FY15), FY16 and FY17.

Meanwhile, Fututech said the proposed acquisition would be satisfied by the issuance of 280 million new shares at an issue price of RM1.16 per share and cash payment of RM55.2 million.

The issue price, the group added, was based on a 9.21% premium to the 30-day volume weighted average market price of Fututech shares, up to the market day preceding the date of the HOA.

In the last three financial years, both Kerjaya Prospek and Permatang Bakti have recorded an average annual profit after tax of RM31 million, Fututech said

The company is expected to finalise the deal within 120 days from date of the HOA, with an automatic extension of 60 days.

The counter was last traded at RM1.15 yesterday, giving it a market capitalisation of RM99.81 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.)