KUALA LUMPUR (Sept 30): Shares of loss-making MESB Bhd fell as much as 24% on thin trading volume this morning despite resolutions being passed at its annual general meeting and extraordinary general meeting (EGM) held today.
At 10.51am, leather fashion products retailer MESB was one of the top three losers on the bourse, losing 20 sen to 65 sen with 800 shares changing hands.
A spokesperson from MESB, when contacted by theedgemarkets.com, confirmed that all the resolutions had been passed including the proposed acquisition of Active Fit Sdn Bhd.
According to a filing with Bursa Malaysia, the EGM was called to obtain shareholders' approval for the proposed acquisition of Active Fit, for RM19 million cash.
To recap, MESB announced to Bursa Malaysia in July that it was acquiring the entire equity interest of Active Fit, the designer and retailer of the "Jeep" apparel brand in Malaysia.
It also said that it had entered into a conditional share sale agreement with Active Fit for the said acquisition.
MESB then 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 also 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 Fit 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.
In its latest announcement on its financials, MESB's net losses contracted to RM537,000 for its first quarter ended June 30, 2015 (1QFY16) from RM737,000 a year ago. Revenue for the period was at RM17.63 million from RM18.2 million previously.
(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.)