This article first appeared in The Edge Malaysia Weekly on July 29, 2024 - August 4, 2024

The YTL Group’s purchase of an 81.24% stake in Singapore-listed NSL Ltd is very unlike the group’s usual strategy of expansion via acquisition at distressed valuations.

The group generally prides itself on its ability to snap up assets when their valuations are low. It took over Taiping Consolidated Bhd in 1998 during the Asian financial crisis, acquired a strategic stake in Australia’s ElectraNet Pty Ltd in 2000 after the dotcom bubble burst and bought Wessex Water of the UK from a bankrupt Enron Corp in 2002.

In 2009, when the world was just recovering from the global financial crisis, YTL Group bought Power Seraya Ltd in Singapore from Temasek.

The group has done done well with the acquisitions.

In its latest deal, YTL Group will need to fork out almost RM1 billion to take over a manufacturer of precast concrete components and prefabricated bathroom units (PBU) in Singapore.

YTL Corp Bhd’s (KL:YTL) subsidiary, YTL Cement Bhd, is proposing to acquire an 81.24% stake in NSL at 75 Singapore cents a share. The price is a marginal premium of 7% above NSL’s last traded market price and translates into a book value of 1.02 times for  the Singapore company, which recorded a loss last year.

Interestingly, NSL, which is majority-controlled by Ong Beng Seng, declared a bumper dividend last year, exhausting more than half its cash of S$240 million. But even after paying the dividend, NSL is still in a net cash position of S$103.8 million (RM357 million).

When YTL Cement completes the purchase of the 81.24% stake, it would need to undertake a mandatory offer to mop up the rest of the shares in NSL. Assuming it gets full acceptance, the whole transaction would cost YTL Cement about RM974 million.

Essentially, YTL Cement is not getting NSL at a distressed price.

Nevertheless, the acquisition paves the way for YTL Cement to move into the international industrial building systems market, as NSL has a major presence in Dubai and Finland. As it already controls most of the Malaysian cement market after its acquisition of La Farge in 2019, it makes sense to now expand overseas.

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