KUALA LUMPUR (March 18): Plastic injection moulding and metal stamping company Ge-Shen Corp Bhd received an unusual market activity query from Bursa Malaysia on Monday, after its share price surged 24.3% or 78 sen to its highest on record of RM3.99.

On the same day, Ge-Shen announced it was buying a 60% stake each in Amity Research & Development Sdn Bhd (ARD) and Amity Technical Services & Consultancy (M) Sdn Bhd (ATSCM), for RM13.5 million cash, to strengthen its position in the electrical and electronics (E&E) sector and expand its income stream.

ARD is principally involved in project engineering and consultancy services related to E&E, while ATSCM provides manufacturing services, including but not limited to printed circuit board assembly (PCBA), product box built, cable and wire assembly.

Ge-Shen said in a bourse filing it had inked a non-binding term sheet with the shareholders of ARD and ATSCM, namely Pak Yue Leong, Tan Chung Ken, Tan Guan Lai, Tan Khay Leang, Tan Kooi Loon and Teh Sheh Chien, to negotiate the terms of the definitive share sale agreement (SSA) they expect to execute within 60 days for the acquisitions.

It expects the proposed acquisitions, to be funded via internal funds and bank borrowings, to be completed by the third quarter of 2024. 

The acquisitions come with a profit guarantee that both ARD and ATSCM shall achieve, for FY2024 and FY2025, a combined profit after tax (PAT) totalling no less than RM6 million. Both ARD and ATSCM had an audited combined PAT of RM2.17 million for the financial year ended Dec 31, 2022.

“This proposed acquisition will expand Ge-Shen’s scale of operations and facilitate the group’s presence in such a market. It is also in line with the group’s objective of acquiring strategic stakes in companies involved in high value-added industries with potential for future growth,” Ge-Shen said.

Ge-Shen also said it is actively pursuing its growth and diversification strategy into the electronic manufacturing services (EMS) sector with its recent M&A activities, to position itself well for a tech upcycle in the coming quarters.

Its plan for the new acquisitions come two weeks after Ge-Shen inked an agreement to buy a 40% stake in EMS firm Local Assembly Sdn Bhd for RM48 million cash. That deal, which marked its diversification into EMS, also comes with a profit guarantee from the sellers.

The acquisition is to be part-funded by proceeds from a private placement involving 30% of its share base that will raise at least RM84.46 million or at most RM91.2 million for the group, and is expected to be completed by the second half of 2024.

Meanwhile, Bursa asked the group if there was any corporate development relating to its business and affairs that had not been previously announced, or if there was any rumour, report or other possible explanation that may account for the unusual trading activity seen in its counter.

The stock, which was the second top gainer across Bursa on Monday, opened one sen higher than its previous close at RM3.22, subsequently jumping to an intra-day high of RM4.03 before paring some gains to close at RM3.99, giving the group a market capitalisation of RM490 million.

Year-to-date, the stock has more than tripled from its closing price of RM1.16 on Dec 29, 2023.

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