KUALA LUMPUR (Sept 28): Taiwan-based Light Emitting Diode (LED) manufacturer Epistar Corporation has proposed to subscribe to 10% of the issued and paid-up share capital of Dominant Opto Technologies Sdn Bhd (DOT), a subsidiary D&O Green Technologies Bhd (D&O Green Tech), for RM64.85 million.

In a filing with Bursa Malaysia, D&O Green Tech said the company and DOT had entered into a conditional share subscription agreement with Epistar today for the subscription of 11 million new DOT shares, representing 10% of the issued and paid-up share capital of DOT.

D&O Green Tech, which holds a 68.71% stake in DOT, said the exercise is expected to be completed by mid-November this year.

DOT is principally involved in designing, developing and manufacturing of opto-semiconductor components, mainly LEDs, to cater for a wide range of product segments for automotive, consumer, communications and industrial applications.

The purchase consideration was reached based on the consolidated net assets attributable to owners of DOT as at Dec 31, 2014 of RM127.22 million and the future potential earnings of DOT.

Based on the net assets attributable to owners of DOT as at Dec 31, 2014 of RM27.22 million, the proposed exercise will increase the net assets per DOT share to RM1.746 from RM1.285, representing a premium of 35.88% or 46 sen per share.

D&O Green Tech said aside from raising working capital for DOT, which is expected to be fully utilised within a year from the completion of the proposed subscription, the company said the proposed subscription represents a strategic collaboration between the group and Epistar, one of the leading high brightness LED and chip manufacturers in the world.

"Epistar has patents for LED products recognised by major industry players and wide network sales channels covering customers across the world," the filing stated.

"Upon completion of the proposed subscription, Epistar will become one of the major shareholders of DOT via its equity in interest of 10% in DOT based on the enlarged issued and paid-up share capital of DOT, enabling Epistar to participate in the future growth of DOT whilst providing DOT with further assurance for its chips or dies supply requirements," it added.

Upon completion of the exercise, the issued and paid up share capital of DOT will increase from 100 million shares worth RM100 million to 110 million shares worth RM300 million, D&O Green Tech said.

However, D&O Green Tech noted that upon completion, the proposed subscription will reduce the contribution of DOT to the group in the future.

It said that D&O Green Tech will only be able to reap 61.84% of the financial results of DOT in the future, compared to the current 68.71% contribution currently.

For the financial year ended Dec 31, 2014 (FY14), DOT saw its profit after tax and minority interests climb 14.53% to RM7.33 million compared to RM6.4 million recorded in financial year 2013 (FY13), while revenue increased 28.3% to RM421.32 million compared to RM328.32 million in FY13.

The proposal would require the approval of shareholders and directors of DOT as well as D&O Green Tech.

D&O Green Tech's shares closed 1.5 sen or 4.23% higher at 37 sen, with a market capitalisation of RM361.97 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.)