KUALA LUMPUR (April 13): ConnectCounty Holdings Bhd has proposed to diversify its business to include the undertaking of construction, project management and related activities.

In a bourse filing, the loss-making cable and connector manufacturer said it is looking for opportunities that will broaden its earnings base, while reducing its operational costs in order to improve its financial performance.

The group said it already, at the end of last year, commenced its construction business via its wholly-owned subsidiary, Waja Development Sdn Bhd, by securing a RM10 million contract for the construction of pile cap and column stumps as well as works below lowest floor finish for phase two of a private medical centre project in Alor Setar.

The group has set up a 51%-owned subsidiary, Waja Build Tech Sdn Bhd, with Teguh Harian Build-Tech Sdn Bhd (TH Build-Tech), which has more than 22 years of experience in the construction industry, specifically in the northern region of Malaysia.

"The board believes that the group would be able to leverage on TH Build-Tech's expertise and track record in the construction industry to secure additional awards in the future," said ConnectCounty.

On April 6, Waja Build was awarded the contract to build the main building and fixed facilities works for the final phase of the medical centre in Alor Setar.

"The award is expected to contribute approximately RM13.1 million to the group's profitability over a period of 24 months from the date of site possession, after taking into consideration the value of the award and the estimated cost of approximately RM115.8 million," said ConnectCounty.

The group expects the new construction business to contribute to more than 25% of its net profit or a diversion of more than 25% of its net assets.

As part of the diversification, ConnectCounty also announced that it would be conducting a private placement of up to 273.02 million shares — equivalent to a 30% of its share capital — to raise up to RM54.61 million, based on an indicative issue price of 20 sen.

Specifically, up to RM49.77 million will be used for its construction business. The amount will be used to fund Waja Build Tech's RM128.9 million contract to construct the medical centre.

The initial six months for the project will incur a construction cost of RM42.9 million, followed by RM72.9 million for the subsequent 18 months.

Meanwhile, as much as RM3.15 million has been earmarked for working capital, with the rest used to defray the expenses associated with the placement.

The group also plans to launch an employees' share option scheme (ESOS) of up to 30% of its total number of issued shares.

As part of the proposed diversification, the group is planning to change its name to Waja Konsortium Bhd.

Assuming that it places out all 273.02 million placement shares and all ESOS options are exercised, the group said its share capital could potentially increase to 1.54 billion shares from 793.44 million currently.

Shares in ConnectCounty closed unchanged at 21 sen, valuing the group at RM166.62 million.