KUALA LUMPUR (Feb 6): Seal Incorporated Bhd is diversifying into solar project engineering, procurement, construction and commissioning (EPCC) by subscribing for ordinary and preference shares of MSR Green Energy Sdn Bhd in a RM15 million deal which could see it raising its stake in the solar EPCC outfit to 20%.

The proposed subscription is a related party transaction, as MSR Green Energy (MSRGE) is 50.96%-owned by KVC Corp Sdn Bhd, which is in turn linked to Seal’s 29.22% shareholder Aaron Chen Khai Voon.

The injection comes a little over six months after Chen, who has direct and indirect interest of 12.32% in Genetec Technology Bhd, emerged as a substantial shareholder in Seal back in July 2023.

Shares of Seal Incorporated have rallied ahead of the announcement, rising by 16.5 sen or 42.86% from its eight-month low of 38.5 sen on Jan 22, to 55 sen at the time of writing. The counter is up half a sen at noon market break, having risen by 1.5 sen to 56 sen earlier.

MSRGE has successfully commissioned approximately 176MWp of solar photovoltaic facilities, Seal said in its filing. The company also aims to become a renewable energy (RE) asset owner and venture into EPCC for other RE projects, Seal added.

It added that MSRGE’s management is working towards key actions plans “which among others include the development of the green digital park in Johor”.

The Seal Incorporated-MSRGE deal comprises subscription of 1.46 million MSRGE shares for RM8.7 million, as well as 1.06 million irredeemable convertible preference shares (ICPS) for another RM6.3 million — both at RM5.94 apiece.

The five-year ICPS are non-transferrable and convertible to MSRGE shares on a one-to-one basis.

Together with other share placements, share grants and issuances by MSRGE for its acquisitions and fund-raising exercise in the pipeline, Seal would hold up to 20% stake in the company post-ICPS conversion.

The entire deal values the solar EPCC player at RM75 million, based on Seal’s subscription price of RM5.94 per ordinary and preference share.

In the financial year ended Dec 31, 2022 (FY2022), MSRGE’s net loss narrowed to RM14.28 million from RM10.12 million in FY2021, as revenue rose 5.15% to RM8.92 million, from RM8.49 million, according to SSM data.

At end-2022, it had retained losses of RM13.28 million and negative total equity of RM8.28 million.

Comparatively, Seal closed the financial year ended June 30, 2023 (FY2023) with a net profit of RM11.74 million or 3.72 sen per share, on revenue of RM51.5 million — largely attributed to a Sungai Petani land sale in 4QFY2023 for RM37 million.

Seal operates in five key segments, namely property construction and timber (both loss-making in FY2023), as well as property investment, property development and property management.

Currently, other shareholders of MSRGE include Ong Kah Hui (47.21%) and Qiang Xiaoyu (1.82%).

Seal said it arrived at the subscription terms based on various licenses and certification held by MSRGE, its order book and ongoing tenders, and the prospects of the RE industry.

MSRGE is also in the process of acquiring a 35%-50% stake in GDP Power Distribution Sdn Bhd, MSR Green Digital Park Sdn Bhd and GDP Solar Farm Sdn Bhd, Seal said.

At 55 sen, Seal has a market capitalisation of RM230.9 million.