This article first appeared in The Edge Financial Daily, on October 8, 2015.
Instacom Group Bhd (+ve)
ACE market-listed Instacom (Fundamental: 1.25/3, Valuation: 0.3/3) saw its share price soar by 82.6% since it obtained Bursa’s approval for a proposed 1-for-3 bonus issue and a proposed acquisition on September 22.
Sarawak-based Instacom, which completed the reverse takeover (RTO) of I-Power Bhd in 2012, specialises in erecting telecommunication towers. The company operates in two industries, namely the ICT industry and telecommunication network services industry. For 2014, the civil, mechanical and electrical works (CME) segment contributed 83.6% of its sales, followed by the telecommunication equipment installation segment (10.3%) and turnkey build and finance segment (6.1%).
In August, the company proposed to acquire an additional 43.6% stake in Neata Aluminium (Malaysia) Sdn Bhd from Golden Oasis Resources Sdn Bhd for RM73.58 million. This will raise its stake in Neata to 78.6%, from 35.0% previously. The acquisition will be satisfied via the issuance of 605.8 million new shares at an issue price of 10 sen each and RM13.0 million in cash.
Neata is mainly involved in design and fabrication of aluminium structures while its wholly-owned subsidiary, Vivocom, is engaged in civil engineering and construction services. The acquisition of Neata comes with an aggregate net profit guarantee of at least RM34 million for financial year 2015-2016. Currently, Neata has an order book of RM247.35 million, equivalent to 3.8 times its sales in 2014.
The proposed acquisition will be implemented after the entitlement date of the proposed 1-for-3 bonus issue. Both proposals are expected for completion in November.
For 1H2015, Instacom fell into the red with a net loss of RM0.5 million, compared to a net profit of RM6.2 million in 1H2014. Meanwhile, sales slumped 60.9% to RM15.7 million, due mainly to lack of new major projects for the CME segment.
The stock currently trades at 1.2 times book. No dividend was paid since the RTO.