KUALA LUMPUR (Feb 6): VS Industry Bhd is diversifing into solar energy generation via the acquisition of an associate 20% stake in a Hong Kong-based entity, which will undertake a RMB220 million (RM125 milion) project in China.

Electronic products manufacturer VS (fundamental: 1.1; valuation: 1.8) said in a statement to Bursa Malaysia today its Hong Kong-listed subsidiary VS International Group Ltd had signed an acquistion agreement to purchase 20% of Cadre Project Development Co Ltd for RMB44 million (RM25 million)

Cadre will be the holding company of Inner Mongolia Gujing Zhaolai Photovoltaic Co Ltd, which is involved in the development of a 20MW solar power plant at LiangCheng county within China's  Inner Mongolia Autonomous Region.

VS said that the acquisition of the Cadre stake was in line with its move to diversify its business.

“As set out in the company’s annual report for the year ended July 31, 2014, the group has been operating under an extremely challenging and competitive environment.

“Against this backdrop, the group has been, among others, looking for suitable opportunities to diversify its income and asset base to enhance shareholders’ value,” it said.

According to VS, the Cadre stake purchase comes with the option to acquire Cadre option shares representing 80% of its issued share capital.

The option share purchase is subjected to fulfilment of certain conditions under the acquisition agreement.

At 12:30pm, VS shares fell eight sen or 2% to settle at RM3.57 for a market capitalisation of RM728.5 million. Trading of the stock was suspended between 9am and 10am today.

VS shares had gained 42% this year, outperforming the FBM KLCI's 2.7% rise.