KUALA LUMPUR (Nov 21): KUB Malaysia Bhd, whose largest shareholder is Datuk Seri Johari Abdul Ghani, has proposed to acquire an 86.65% equity interest in Central Cables Bhd (CCB) from the businessman-politician's investment vehicle JAG Capital Holdings Sdn Bhd.

The purchase consideration of RM119.42 million will be satisfied via the issuance of 199.04 million new shares in KUB at 60 sen per share, KUB said in a filing with Bursa Malaysia on Tuesday.

Upon completion of the acquisition, KUB said it will extend a mandatory general offer to acquire all of the remaining CCB shares at RM2.60 per share to be satisfied either wholly in cash amounting up to RM18.4 million in total or via the issuance of new shares in KUB, also at an issue price of 60 sen per share. This brings the total valuation of CCB by KUB to RM137.82 million.

CCB was incorporated in 1967 and is principally involved in the manufacturing of power cables and wires.

Johari's son, Amir Nashrin Johari, is a director in both CCB and JAG Capital.

KUB said the acquisition will enable the group to venture into the manufacturing of power cables and wires, which is an upstream activity within the value chain of the power industry that will integrate well with its existing power business under wholly owned subsidiary KUB Power Sdn Bhd.

KUB Power provides civil engineering services within the power industry, including substation and transmission line construction, supply and installation of electrical infrastructure, and electrical maintenance.

KUB also seeks to capitalise on the resources, expertise and strength of CCB in securing new projects for the power business, thereby enhancing its operational efficiencies, bidding strategies, financial position and prospects of the enlarged KUB group.
 
KUB expects the new business under CCB to contribute 25% or more of the group's net profit and/or result in a diversion of more than 25% of the net assets of the group going forward.

"This is consistent with the group’s plan to diversify its revenue and income stream so as to mitigate the risk of overdependence on the LPG (liquefied petroleum gas) business as well as to reap the synergistic benefits from the proposed acquisition," the group added.

For the financial year ended June 30, 2023 (FY2023), CCB increased its profit after tax by more than five times to RM11.65 million compared with RM2.03 million in FY2022 as revenue increased 41.7% to RM199.15 million from RM140.55 million, mainly due to an increase in purchase orders received from customers. Its total borrowings stood at RM42.75 million with a gearing of 0.53.  

In a separate bourse filing, KUB announced on Tuesday that its net profit for the first quarter ended Sept 30, 2023 (1QFY2024) surged 96.3% to RM7.35 million from RM3.74 million a year ago, largely driven by the encouraging performance from the LPG division and a gain from disposal of assets of RM2.8 million.

However, quarterly revenue dipped 11.2% to RM114.04 million from RM128.41 million previously.

Looking ahead, the group said it continues to foresee a challenging and competitive economic environment to remain as issues in FY2024 due to weakening of the ringgit and inflationary pressures.

"Overall, the group will continue to maintain a cautious stance on the overall market and industry outlook, while remaining flexible in executing strategic plans in expanding our existing business and identifying new business opportunities as and when they arise," KUB said.

Shares of KUB inched up 0.5 sen or 0.9% to close at 56 sen, valuing the group at RM308.84 million in market capitalisation.