KUALA LUMPUR (July 11): The Ling family behind shipping company Shin Yang Group Bhd (KL:SYGROUP) is injecting part of their Toyota and Lexus car dealership business in East Malaysia into Shin Yang for RM144.5 million, in a cash and share deal.

In a bourse filing, Shin Yang said it had signed two separate conditional share sale agreements to buy Boulevard Jaya Sdn Bhd — an authorised dealer of Toyota vehicles in Sarawak and an authorised agent of Lexus vehicles in the state — and to take up a 60% stake each in three other companies involved in related automotive businesses, including sale of spare parts, after-sales services, and the servicing and repairing of Toyota and Lexus vehicles in East Malaysia. The acquisitions are to diversify its revenue stream. 

It is buying Boulevard Jaya for RM27.5 million cash from Shin Yang Holding Sdn Bhd, KTE Motors Sdn Bhd and Ling Chiong Sing, Shin Yang's group managing director and brother of Shin Yang's group executive chairman Tan Sri Ling Chiong Ho. Shin Yang Holding is the major shareholder of Shin Yang and the private vehicle of the Ling family, which controls over 60% of Shin Yang. Shin Yang Holding's shareholding is split equally between the brothers Chiong Ho, Chiong Sing, Chiong Sieng and Chiong Pin at 25% each.

As for the three other target companies, Shin Yang is forking out RM70.17 million cash and 55 million Shin Yang treasury shares worth RM46.83 million to buy a 60% stake each in Boulevard Motor Sdn Bhd, Boulevard Motor (Sabah) Sdn Bhd, and Boulevard Motor (Labuan) Sdn Bhd (collectively the Boulevard Motor Group). It is buying the stakes from Dwi Bumijaya Sdn Bhd, in which the four Ling brothers, together with their sister Ling Siu Chuo, are directors. Dwi Bumijaya is a company controlled by the children of the Ling siblings.

According to Shin Yang, Boulevard Jaya made a net profit of RM4.67 million for its financial year ended June 30, 2023, while the PAT for the Boulevard Motor group (in proportion to the 60% stake it intends to acquire) stood at RM20.11 million for their financial year ended Dec 31, 2022.

Shin Yang plans to fund the acquisitions using internal funds. As for the treasury shares to be transferred, they represent about 4.64% of its issued share capital post-acquisition (excluding treasury shares, which will be reduced from 70.34 million to 15.35 million).

Shin Yang anticipates the acquisitions, which it expects to be completed by the third quarter of this year, to reduce the group’s dependency on its current shipping and shipbuilding business, and contribute positively to its future earnings.

"[Shin Yang will] leverage on the acquired companies' networks and client bases to cross-sell the group’s shipping services such as containerised freight transportation from Peninsular to East Malaysia, port-to-port freight services, port-to-doors haulage services, customs clearing, import and export documentation and port-related services," it said.

The group made a net profit of RM80.23 million for the nine months ended March 31, 2024 (9MFY2024), down about 40% from RM133 million it made in 9MFY2023, as revenue dropped to RM709.87 million from RM716.52 million, while cost of sales rose 10% to RM610.86 million and tax expense more than doubled.  As at end-March, Shin Yang had cash and bank balances of RM392.32 million, and total borrowings of RM75.99 million.

Shin Yang’s shares closed 1.5 sen or 1.94% higher at 79 sen on Thursday, bringing the group’s market capitalisation to RM948 million. The stock has climbed over 33% in the last two months.