KLANG (9 Apr) - LTKM BERHAD (Bloomberg: LTKM:MK, Reuters: LTKM.KL), a leading chicken egg producer, today announced a composite proposal, chiefly to divest the Company’s existing business and venture into the business of providing of electronic manufacturing services (EMS) while at the same time, rectify its non-compliance with the public spread requirement of its shares under the listing requirements of Bursa Securities Malaysia Berhad.
From left to right: Co-founder and Managing Director of Local Assembly Chai Voon Sun and Executive Chairman of LTKM Datuk Tan Kok
Executive Chairman of LTKM, Datuk Tan Kok said, “At its core, the proposals seek to reward our shareholders from the proceeds of the disposal of the Company’s existing poultry business while at the same time, allow them to continue participating in the new EMS business following the proposals.”
“The proposed disposal comes amid the challenging operating landscape for the poultry industry brought on by overcapacity, low average selling price of eggs, high raw material prices, difficulty in controlling disease outbreaks in the farms and acute labour shortage. In relation to these challenges, we have also incurred losses in the recent financial years ended 31 March 2020 to 2021 and for the nine-month period ended 31 December 2021. This has affected our ability to pay dividends too.”
“Concurrent with the proposed disposals, we believe the proposed acquisition of the EMS business is an opportunity to create value for our shareholders through a business that is viable and profitable.”
Briefly, the proposals comprise the following inter-conditional steps:
From Left to Right: Co-founder, Executive Director and Engineering Director of Local Assembly Wee Thian Song; Co-founder, Executive Director and General Manager of Local Assembly Gurmakh Singh; Executive Chairman of Chin Hin Group Berhad Datuk Seri Chiau Beng Teik; Co-founder and Managing Director of Local Assembly Chai Voon Sun; Executive Chairman of LTKM Datuk Tan Kok; Independent Director of LTKM Tan Kah Poh and Director of Proven Venture Sdn. Bhd. Rahman Ali Bin Abdul Wahab
The proposed acquisition will result in a significant change in LTKM’s business direction from a producer of chicken eggs to becoming an EMS provider. Local Assembly, an EMS provider, will become a wholly-owned subsidiary of LTKM while the vendors of Local Assembly will become LTKM’s controlling shareholders with a 56.6% equity interest in the Company following the proposed acquisition and proposed restricted issue. By virtue of his shareholding in Divine Inventions, Datuk Seri Chiau Beng Teik, the Executive Chairman of Chin Hin Group Berhad, will become a major shareholder of LTKM.
Under the proposed acquisition, the vendors have provided a profit guarantee for Local Assembly of a minimum profit after tax (“PAT”) of RM28.00 million for the financial year ending 31 December 2022 or not less than an aggregate of RM50.00 million PAT for both financial years ending 31 December 2022 and 2023. Based on the guaranteed PAT of RM28.00 million for the financial year ending 31 December 2022, the purchase consideration represents a price to earnings multiple of 12 times.
For Chai Voon Sun, co-founder and Managing Director of Local Assembly, the listing of Local Assembly via LTKM means a realisation of 2 decades of hardwork for him and his co-founders and a step forward in the company’s journey of growth and expansion. “This transaction is a major milestone for Local Assembly. We look forward to the next phase of our corporate journey as a listed entity, which will further accelerate our growth as an EMS player, allow us to expand our customer base and product offerings and pursue more opportunities” he adds.
Local Assembly, which started operations in 2000, is a manufacturer of electronic, electrical and plastic injection moulded components, and sub-contract assembler of electrical appliances and equipment. Its principal markets are Malaysia and Singapore. For the financial year ended 31 December 2022, Local Assembly achieved PAT of RM20.06 million on the back of a revenue of RM116.35 million.
The application for the proposals is expected to be submitted to the relevant authorities by the second quarter of 2022. Subject to approvals from relevant parties including Securities Commission, Bursa Securities Malaysia Berhad as well as shareholders of LTKM, the proposals are expected to be completed in the first half of 2023.
M & A Securities Sdn Bhd is Adviser to LTKM for the proposals.
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i know right, can see that they have taken such a huge step to divert the business into EMS
2022-04-08 15:46
yess, it may take a great courage for this company in making this decision
2022-04-08 15:48
omg, I have never thought of them going into EMS business, such a huge surprise!
2022-04-08 15:50
Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥
Through this corporate exercise, Dato Tan Kok has essentially taken the poultry and egg business private. The new business injected into LTKM (which will be renamed) will be controlled by a new majority shareholder, completing the reverse take over of LTKM by the new shareholders.
2022-04-08 17:43
After the dust has settled
Even at PE 25x.. current price is overpriced
2022-04-10 10:06
Patriciaa
Interesting news!
2022-04-08 15:36