KUALA LUMPUR (April 26): ACE-Market listed Kanger International Bhd is buying a 51% stake in building materials supplier Sung Master Holdings Sdn Bhd for RM94.8 million.

The group has inked a conditional share sale agreement with Sung Master’s shareholders and directors, namely Sii Tung Nai, Sii Tung Aik and Lim Shwu Huey, for the purchase. The proposed acquisition will be satisfied by a combination of cash of RM52 million and the issuance of 713.2 million new Kanger shares at six sen apiece for the remaining RM42.8 million, Kanger said in a statement.

The RM52 million cash will be partially funded through the proceeds of a proposed subscription agreement entered with Kanger's executive director Steven Kuah Choon Ching for the subscription of 769.5 million shares at six sen each, which would raise a total of RM46.2 million. The remainder will be sourced from internal funds and bank borrowings.

Sung Master is primarily involved in the sales and trading of building materials, including timber, flooring, tiles, bulk cement, concrete, locksets and sanitary ware.

Kuah said the acquisition is well-aligned to strengthen and complement the group’s newly established construction business, which has construction orders totalling about RM1 billion. It is also timely, he said, given the gradual resumption of business activities and the rollout of vaccines nationwide, which helps the recovery of construction activities.

The acquisition of this "direct peer" is expected to bring synergistic benefits. "As Kanger is currently involved in manufacturing and trading of bamboo flooring and related products, adding Sung Master’s wide range of products and large pool of building material suppliers into our portfolio will diversify our product offerings to better serve our clients, as we have similar customer groups,” Kuah said.

Given the lower input prices Kanger can attain from its enlarged network of suppliers, this enhances the group’s competitive advantage to secure more construction contracts in the future. “We are currently in negotiations with multiple parties to secure a few more potential construction projects in the near term and hope to deliver positive developments on that front soon," Kuah said.

Kuah also said Sung Master has been consistently profitable over the past three financial years, and its ongoing orders of approximately RM600 million to supply to residential and mixed development projects will augur well for its future earnings. For the 17 months ended June 30, 2020, Sung Master recorded a profit after taxation (PAT) of RM12.4 million, on a revenue of RM141.8 million.

Kanger shares settled one sen or 16.67% higher at seven sen today, giving it a market capitalisation of RM179.55 million. It saw some 111.08 million shares done.