TO turn around its business, WZ Satu Bhd acquired KenKeong Sdn Bhd and Misi Setia Oil & Gas Sdn Bhd. This paved the way for the loss-making steel manufacturer to enter the civil engineering, construction and mining as well as oil and gas (O&G) industries.

The restructuring, via diversification into new businesses, seems to have been well received with the stock gaining 105% year to date to RM1.61 as at Dec 17. It had hit a high of RM2.85 in October.

WZ Satu acquired KenKeong for RM27.5 million to have a presence in the civil engineering, construction and mining industry. The acquisition was followed by the implementation of a rights issue of 55 million new WZ Satu shares on the basis of one rights share for every two existing ordinary shares held at an issue price of 60 sen per rights share.

The rights issue was undertaken on a minimum subscription basis, with undertakings from substantial shareholders to subscribe in full for their entitlements of about 29.3 million rights shares. The rights issue was oversubscribed by 9.2%, raising gross proceeds of RM33 million for the repayment of borrowings and working capital requirements.

With the acquisition of KenKeong and rights issue exercise completed in May, WZ Satu saw its market capitalisation strengthen from

RM105.6 million on Jan 9 (prior to the announcement of the proposals) to RM147.3 million on May 12 (after the completion of the corporate exercise).

Not one to rest on its laurels, WZ Satu continued its diversification exercise by announcing another deal in July to acquire Misi Setia for RM27 million.

The acquisition was satisfied by RM16.2 million cash and the issuance of 10.6 million new WZ Satu shares at an issue price of RM1.02 each. These exercises were completed on Nov 5.

Post-acquisition of Misi Setia, WZ Satu’s market capitalisation ballooned to RM544 million as the stock closed at RM2.28 on Nov 5. While it had surrendered some gains, closing at RM1.61 on Dec 17, its market capitalisation was at

RM406.7 million, being four times what it was worth in the beginning of the year.

Hong Leong Investment Bank acted as the principal adviser for all the acquisitions and fundraising exercises by WZ Satu.

The newly acquired business under KenKeong alone boosted WZ Satu’s financials between May 1 and Aug 31 — it reported a net profit of RM10.4 million on revenue of RM82.3 million for the four months, compared with a net profit of RM1.4 million on revenue of RM89.7 million for the 12 months ended April 30, 2014.

However, it looks like WZ Satu is not stopping there. On Nov 6, it announced to Bursa Malaysia that it had entered into a heads of agreement with the shareholders of UBF Maintenance Sdn Bhd to buy the company for RM79 million.

UBF is a general and maintenance contractor for upstream and downstream O&G companies.

Under the deal signed with Khairul Anuar Mohd Nor, Datuk Leom Joo Deck, Cheong Cheng Kee and Wong Ka Tiang, the acquisition will be paid for with RM39.5 million cash and new WZ Satu shares. A detailed announcement will be made once the definitive agreement for the deal has been signed.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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