KUALA LUMPUR: For a company that has been loss-making for five financial years and was worth just RM19 million one year ago, a potential buyout offer that values it at over RM320 million probably looks too good to be true.
But that’s precisely what Ninetology Marketing Sdn Bhd is willing to pay for Ingenuity Solutions Bhd — as implied by the restricted offer to Ingenuity’s four substantial shareholders collectively holding 39.44% stake.
The offer, valid until next Tuesday, has to be accepted by all four shareholders, including Chin Boon Long, managing director of 1Utopia Bhd, who owns 30.24% of Ingenuity directly and indirectly as at Aug 13.
Ninetology’s offer would be void if Chin or any of the other shareholders — Firstwide Success Sdn Bhd, Landasan Simfoni Sdn Bhd and Titanium Hallmark Sdn Bhd — does not accept. Chin’s wife, Chan Swee Ying, controls Firstwide.
A check on Bloomberg showed more than 300 companies on Bursa Malaysia trading below 16 times earnings before interest, tax depreciation and amortisation (Ebitda) based on yesterday’s closing price. They include big names like Sime Darby Bhd, Genting Bhd, IOI Corp Bhd, Genting Malaysia Bhd and even consistent dividend payers like DiGi.Com Bhd and Telekom Malaysia Bhd (TM).
Just to illustrate, RM320 million can buy close to 1% of Genting, whose market capitalisation stood at RM33.5 billion. The same RM320 million can also buy 1.45% of TM, whose dividends give at least 3% yield per year. Atrium Real Estate Investment Trust’s market cap was also only RM148 million based on yesterday’s closing, for instance.
Chin is calling for a media conference tomorrow “in response to the offer received” for his shares in Ingenuity, according to a media invitation. The invitation did not say whether Chin intends to accept or reject Ninetology’s offer.
In a media conference last Thursday, Ninetology CEO Sean Ng Chee Heng said Ingenuity is worth the 16 times Ebitda at which its restricted buyout offer values the company. Ng said the 55 sen apiece to the Ingenuity quartet is his final offer.
Chin’s 1Utopia’s market capitalisation was about RM70 million and the stock was trading at 6.6 times Ebitda, Bloomberg data showed.
To be sure, Ingenuity was not always worth RM320 million. From its 52-week low of 3.5 sen on Sept 5 last year, Ingenuity’s share price ran more than 10 times to as high as 51 sen on Aug 23 this year.
What is Ninetology and does it have RM320 million to spend? At last Thursday’s press conference, Ng said Ninetology wants 100% or 0% of Ingenuity and has secured unnamed “angel investors” to allow it to pay over RM320 million cash for the company.
Having not officially made a buyout offer, Ninetology does not yet need to officially disclose to regulators it has the funds to mount a takeover. Ninetology is a newly set up company with RM2 paid-up capital and has made less than RM1 million profit in the first five months it has been in existence.
Between March 16 and July 31, Ninetology had an unaudited profit of RM952,482 on a turnover of RM4.92 million, according to a statement on Aug 30 by Ingenuity in reply to a Bursa Malaysia query.
Ninetology’s shareholders are Beh Heng Thye, 32, from Taiping, Perak, and Liu Fu, 54, from Shah Alam, Selangor. Beh and Liu are directors alongside CEO Ng, 31, and Shian Hwee Cheng, 39, filings with the Companies Commission of Malaysia show.
Interestingly, Ingenuity’s share price did not surge on the news of the restricted offer by Ninetology. The stock has dropped to 35 sen yesterday, 3.72 times its unaudited net assets per share of 9.4 sen as at June 30. As at Aug 13, some 68.7% of Ingenuity was in the hands of its top 30 shareholders, its latest annual report showed.