KUALA LUMPUR (June 5): Loss-making hard disk drive (HDD) and semiconductor cleaning services provider MClean Technologies Bhd has proposed to acquire 55% of DWZ Industries Sdn Bhd to diversify into the surface finishing business, which is expected to contribute to 25% of its bottomline in the future.

This follows the company’s announcement on April 10 that a memorandum of understanding (MoU) has been signed with Decor Industries Pte Ltd, in relation to the proposed acquisition.

In its filing today to the local bourse, MClean (fundamental: 0.95; valuation: 0.3) said it has entered into a conditional share sale agreement (SPA) with Decor to acquire 550,000 DWZ shares (equivalent to a 55% stake in the company) for RM14.09 million, which will be satisfied via the issuance of 56.38 million new shares.

“The board believes that, barring any unforeseen circumstances, the surface finishing business is reasonably expected to contribute 25% or more of the net profits of the MClean group and/or the diversion of 25% or more of the MClean Group’s net assets to the operations of DWZ Group, in the near future,” it said.

Upon completion of the acquisition, DWZ will become a 55%-owned subsidiary of MClean, while Decor will hold the remaining 45% stake.

Additionally, MClean also proposed a free warrants issue of up to 42.26 million new warrants, with an exercise price of 25 sen each — being the par value of MClean shares — on the basis of six warrants for every 25 shares held by its shareholders, at an entitlement date to be fixed later.

The amount of proceeds arising from the exercise of the new Warrants during the exercise period, will depend on the actual number of new warrants exercised during their tenure.

Assuming the full exercise of new warrants at the exercise price of 25 sen each, the MClean Group intends to utilise the resulting proceeds of RM10.57 million for its working capital.

The company expects to complete the series of proposals in the third quarter of 2015.

MClean closed up 1 sen or 5% at 21 sen today, for a market capitalisation to RM24.65 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)