KUALA LUMPUR (Oct 1): ACE Market-listed automated test equipment (ATE) manufacturer Aemulus Holdings Bhd (KL:AEMULUS) said it is taking full control of its loss-making Chinese associate company Tangming Shengshi Technology (Jiashan) Co Ltd (TMSS) before looking for new investors to turn around the firm.
In a filing with Bursa Malaysia on Tuesday, Aemulus said its wholly owned subsidiary Aemulus Corp Sdn Bhd (ACSB) has entered into an agreement with Tangren Microtelligence Technology (Jiashan) Co Ltd to acquire the remaining 60% stake in TMSS for 25 million yuan (RM15.05 million) cash.
By gaining full control in TMSS, Aemulus said it will be able to plan out the business direction of the company by having the flexibility to identify suitable investors, which are aligned with the group’s strategic objectives in respect of TMSS’ operations in China, without the influence of Tangren Microtelligence.
The group said that upon completion of the acquisition, expected to be in the first quarter of 2025, its plans to increase TMSS' registered capital by up to 60% of the enlarged registered capital for subscription by third party investors.
The minimum capital to be raised by TMSS via the proposed increase in registered capital will be at least 62.5 million yuan, the group said.
As a result, Aemulus' indirect shareholding in TMSS will be diluted back to 40% following the increase in registered capital.
"The proposed increase in registered capital of TMSS, which may be undertaken in multiple tranches, would accord flexibility to the group to procure suitable investors to subscribe for the capital of TMSS and provide additional funding for the funding requirements of TMSS’ working capital, research and development expenses and/or capital expenditure," Aemulus said.
"On the selection of the investor(s), the group will consider factors such as, among others, familiarity in semiconductor ATE industry in China, ability to widen the customer base of TMSS, assisting in the localisation of certain manufacturing inputs and/or processes as well as contributing to the growth and expansion plans of TMSS," it added.
In 2020, Aemulus teamed up with Chinese technology company Tangren Microtelligence to form TMSS on a 40:60 basis, to enter the China market.
TMSS is involved in the development and sales of semiconductor equipment and the provision of design consultancy services. The company recorded losses after taxation of 2.91 million yuan and 6.49 million yuan for the financial year ended Dec 31, 2022 (FY2022) and FY2023 respectively.
As at end-FY2023, its total assets stood at 103.51 million yuan while its liabilities totalled 73.83 million yuan.
Moving forward, Aemulus said that TMSS will expand "gradually and carefully" in China by establishing several key functions such as finance, procurement and research and development which are currently assisted by Tangren Microtelligence and the group.
"This shall allow TMSS to be independent from its holding company in respect of its operations in China which in turn will help TMSS to improve its cost efficiencies for it to be more competitive in [the] China ATE market," it said.
Aemulus remained in the red for the seventh straight quarter in 3QFY2024, with a narrowed net loss of RM2.99 million, compared with a net loss of RM6.9 million in the previous corresponding quarter.
This was despite a surge in quarterly revenue, which more than doubled to RM10.35 million from RM3.86 million in 3QFY2023, attributed to the recovery in the semiconductor industry and stronger demand from customers
For the first nine months of FY2024, Aemulus’ net loss narrowed to RM8.6 million from RM16.36 million in the same period of FY2023, while revenue rose 39.6% to RM26.52 million from RM18.99 million.
Shares of Aemulus closed up half a sen, or 1.85%, to 27.5 sen on Tuesday, valuing the group at RM184.62 million.