KUALA LUMPUR (June 24): Integrated engineering solutions provider Destini Bhd today announced it intends to buy a paramilitary vessel manufacturer at an indicative price of RM90 million, to further expand its marine division.
In a filing to Bursa Malaysia today, Destini (fundamental: 1.7; valuation: 0.8) said it had entered into a heads of agreement (HoA) for the proposed acquisition of Destination Marine Services Sdn Bhd (DMS) with Ultrasama Marine Sdn Bhd, Goldleaf Pavilion Sdn Bhd and Radzuan Idris (the vendors) today.
It said the consideration for the proposed acquisition may be satisfied via a combination of new shares and/or cash.
“We wish to highlight that the purchase consideration for the proposed acquisition is indicative at this juncture and may be subject to adjustments, depending on any further negotiations, the outcome of the due diligence to be conducted on DMS, and the execution of the share sale agreement in relation to the proposed acquisition,” said Destini.
DMS manufactures paramilitary boats and various types and sizes of vessels and its track record spans over four decades, besides providing ship repair and marine-related engineering services.
It has built and delivered over 200 boats of different sizes and performance capabilities to government agencies and commercial sectors in Malaysia and abroad, such as India, Bangladesh and Kuwait, said Destini.
Destini said DMS was recently awarded with a three-year contract by the Malaysia Maritime Enforcement Agency (MMEA), valued at RM381.3 million, to build 6 units of patrol boats.
Destini said the acquisition comes with a profit guarantee of RM10 million in 2015, and RM15 million in 2016.
The HoA grants Destini 90 days to conduct the due diligence on DMS on an exclusive basis; it also grants the vendors the same period for their due diligence on Destini.
The proposed acquisition requires the approval from shareholders at an extraordinary general meeting to be convened.
“This acquisition is in line with the group’s strategic plans to expand the marine division further. It is earnings accretive and provides many synergistic benefits to the Group,” Destini's managing director Datuk Rozabil Abdul Rahman said in a separate statement.
“We are now able to offer a wider range of marine products and maintenance services to include paramilitary vessels used for patrolling exercises and search and rescue operations,” he added.
Destini added that DMS’ boat building and ship repair services are carried out at its shipyards in Port Klang, Selangor and Bakar Batu, Johor; these shipyards have the capacity to handle boats weighing up to 450 tonnes.
Currently, Destini is involved in the manufacturing of lifeboats, which are conducted by its subsidiary Vanguard Composite Engineering Pte Ltd (Vanguard) which supplies its products to the marine and oil & gas companies in ASEAN, China, Middle East, Europe and Brazil.
“Vanguard’s factory in China is operating near full capacity due to high demand, and we have been exploring for a suitable location to expand our manufacturing facilities to. The acquisition of DMS gives us a ready shipyard in Malaysia, with sufficient space and ready infrastructure for us to utilize,” Rozabil explained.
Destini rose 1.5 sen or 2.27% to 67.5 sen today, for a market capitalisation of RM543.27 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.)