KUALA LUMPUR (Feb 14): Hong Seng Consolidated Bhd was the top active stock in Bursa Malaysia's morning trading session, opening at 20 sen — which is unchanged from its last closing price — after announcing that it was buying CSH Alliance Bhd's electric vehicle (EV) distributor Alliance EV Sdn Bhd (AEV) for RM20 million cash.
Its share price jumped as high as 7.5% or 1.5 sen to 21.5 sen, amid heavy trading volume of 124.36 million shares.
On Monday, the group announced that it had entered into a share sale agreement (SSA) with CSH Alliance for the proposed acquisition of five million ordinary shares in AEV.
Hong Seng said the purpose of acquiring AEV and the 55.3-acre Tanjung Malim land it owns is to enable the glove maker to emerge as an integrated player by venturing into both the upstream and downstream segments of the EV supply chain with the synergies created from both Project Volt and Project EV.
Under Project Volt, Hong Seng had entered into a memorandum of understanding with EoCell Inc on June 10, 2022, whereby both parties intend to build and create a regional manufacturing hub in Malaysia to manufacture batteries for EVs and progress with to other power storage solutions for EVs, and to supply to EV manufacturers, assemblers, and users in Southeast Asia.
Project EV, meanwhile, was a collaboration with BYD Malaysia Sdn Bhd — the Malaysian arm of BYD Company Ltd — including the business of distribution of the BYD T3 commercial electric van model, setting up a 4S service centre for after-sales services, with 4S stands for sales, service, spare parts and body and paint services, as well as a local assembly plant in Tanjung Malim.
“AEV would become a wholly owned subsidiary of Hong Seng upon the completion of the sale and purchase of the sale shares pursuant to the terms and conditions as set out in the SSA,” said the group.
“The purchase consideration is expected to be funded via the group’s internally generated funds.
“Upon completion of the proposed acquisition, the board believes that the EV business of AEV would contribute positively to Hong Seng group’s future earnings and to improve Hong Seng group’s financial position while reducing dependency on its existing businesses after taking into consideration the prospects of the EV industry…” the group added on the rationale of the SSA.
“After completion of the proposed acquisition, should the company foresee the EV business to potentially contribute at least 25% or more of the net profits of Hong Seng group and/or diversion of 25% or more of Hong Seng group’s net assets, the company will make the necessary announcement and/or seek the approval from its shareholders, if required, for the diversification of its business activities into EV business,” it said.
According to its 2022 annual report, its net cash used in 2022 was RM77.94 million against the preceding year's RM100.58 million gains from its financing activities.
Meanwhile, its non-current liabilities have risen to RM13.81 million from RM63,000 in 2022 due to bank borrowings of RM12.32 million and deferred tax liabilities of RM93,000. Additionally, the group has lowered its current liabilities to RM27.01 million in 2022 from RM41.69 million in 2021, with a reduction of short-term bank borrowings to RM1.29 million.
The group paid its last dividend of two sen for financial year 2013 (FY2013), down from 2.5 sen for FY2012. Its highest dividend was 10 sen for FY2007.