KUALA LUMPUR (Sept 13): MMAG Holdings Bhd (KL:MMAG) is going to take over Velocity Capital Partner Bhd's (KL:VELOCITY) stake in its 86.09%-owned loss-making subsidiary, Line Clear Express Sdn Bhd (LCE).
According to MMAG's latest filing, it is planning to acquire Velocity Capital's 8.91% stake in LCE for RM13.75 million cash, which will raise MMAG's stake in LCE to 95%. The remaining 5% in LCE is held by HKL Dynamics Sdn Bhd, an 85%-owned subsidiary of Hong Seng Consolidated Bhd (KL:HONGSENG).
MMAG was previously a major shareholder of Velocity Capital — formerly known as CSH Alliance Bhd — holding 16.61% of its shares. MMAG sold the stake, together with warrants it held in CSH, for RM37.36 million cash in September last year.
LCE is engaged in the courier and logistic businesses, providing services such as warehousing, last mile delivery, e-commerce customised services and special/security handling delivery via air, sea and land freight.
Loss-making over the last four years, LCE incurred a loss after tax (LAT) of RM49.71 million on a revenue of RM121.63 million for its 15-month period ended June 30, 2024 (15MFY2024). LCE changed its financial year-end from March 31 to Sept 30 this year. As at end-June, its net liabilities stood at RM125.07 million.
MMAG said LCE has been focusing on enhancing its operational capabilities through strategic investments in automation and the adoption of advanced IT systems.
"Despite its current loss-making position, LCE is experiencing revenue growth, indicating potential long-term advantages from these technological upgrades.
"In view of Velocity’s intention to divest its balance investment in LCE, the proposed acquisition is viewed positively for MMAG Group to increase its stake in LCE to gain additional control and to reap the additional benefits upon LCE turnaround [of] its business profitability in the future," MMAG said in its Friday filing.
MMAG expects to fund RM3.75 million of the purchase consideration through internal funds, while the remaining RM10 million will be fulfilled by proceeds received from the exercise of the company's warrants. The proposed acquisition is expected to be completed in the fourth quarter of this year.
MMAG shares closed unchanged at 31.5 sen on Friday, giving it a market capitalisation of RM642.8 million.