KUALA LUMPUR (Feb 8): NationGate Holdings Bhd is acquiring Hesechan Industries in Prai, Penang for RM25 million in cash, as it seeks to acquire additional manufacturing space to facilitate its business expansion.

In a bourse filing on Thursday, the electronics manufacturing services (EMS) provider announced that it had entered into a share sale agreement with the vendor, Heap Seong Chan Company Sdn Bhd, to acquire Hesechan as a wholly owned subsidiary.

Hesechan is principally involved in the business of warehousing and logistics services. According to the filing, the present paid-up share capital of Hesechan is RM2 million comprising two million ordinary shares, with Heap Seong Chan being its sole shareholder.

NationGate said the purchase consideration was made after considering, among other factors, the market value of a property in the Prai Industrial Estate reported at RM25 million as of December 2023. The net book value of the property as of July 2023 was RM4.64 million.

It said the property, which comprises four factories and an office block, is used for Heap Seong Chan’s business activities related to warehousing and general carriers.

“The acquisition represents a strategic investment for expansion, and is undertaken in line with NationGate and its subsidiaries’ long-term plan to grow its business. As the group intends to continue expanding its business, it envisages the requirements of additional manufacturing space to facilitate the expansion,” it stated.

Furthermore, NationGate believes that the prospects of the acquisition remain favourable.

“[Facing] the fast-paced nature of the electrical and electronics industry, coupled with the continuously changing technological landscape globally, the group’s relentless effort in bringing up the value chain of the manufacturing services rendered shall keep us ahead in this competitive market.

“The group intends to continuously strive for technological advancement and cost-effectiveness, and build strong collaboration in its supply chain ecosystem to better position itself in the EMS market,” it stated.

Barring any unforeseen circumstances, the acquisition is expected to be completed by the end of the first quarter ending March 31, 2024 (1QFY2024).

On the financial front, NationGate noted that the impact of the acquisition on its gearing could only be determined based on the final breakdown of the funding sources to finance the acquisition.

For 3QFY2023, the company reported a gearing ratio of 0.31 times, compared with 1.39 times as at Dec 31, 2022.

Meanwhile, it reported a net profit of RM44.89 million for the cumulative nine months ended Sept 30, 2023 (9MFY2023), 29% lower compared with RM63.09 million for 9MFY2022.

At Thursday’s close, NationGate saw its share price rise by five sen or 3.68% to RM1.41, giving it a market capitalisation of RM2.92 billion.