KUALA LUMPUR (Oct 11): Glostrext Bhd (KL:GLXT) has proposed diversifying its business to include the trading of electrical appliances, generators, alternators and related products through the acquisition of a 70% stake, or 3.5 million shares, in Powertecs System Sdn Bhd.

Glostrext has signed a deal to purchase the shares from Powertecs’ shareholders Chen Song Wie and Ng Chuee Choo in a transaction that involves a combination of cash and shares, with a total purchase consideration of RM4.2 million.

According to the group’s bourse filing, RM2.1 million will be settled in cash. The remaining will involve the issuance of 10 million new shares in Glostrext, or 2.4% of its enlarged share capital, at an issue price of 21 sen per share.

For its financial year ended December 31, 2023, Powertecs reported a profit after tax (PAT) of RM1.8 million on the back of RM57.7 million revenue. Glostrext, meanwhile, closed its financial year ended March 31, 2024 with net profit of RM1.48 million and revenue of RM25.5 million.

The purchase consideration was arrived at based on a “willing buyer-willing seller” basis, which among others took into consideration Powertecs’ adjusted consolidated net asset of RM6.8 million based on the audited statement of Powertecs as at end-FY2023.

“The company has opted to partly settle the purchase consideration via the issuance of consideration Shares to align its interests with Chen Song Wie, who shall retain his 30% shareholding in Powertecs; conserve its existing cash for future working capital requirements; and minimise external financing and its associated financing cost,” said Glostrext.

Glostrext is a geotechnical instrumentation service provider, where it provides piling, structural and geotechnical-related services, covering instrumentation, testing and monitoring services to construction projects as well as completed buildings and infrastructure.

Glostrext said the diversification could potentially contribute 25% or more to the group’s future net profit and net assets.

The exercise, which is subject to shareholders' approval at the forthcoming extraordinary general meeting, as well as approval from any other relevant authorities, is expected to be completed by the first quarter of 2025.

Glostrext closed down half a sen or 2.38% to 20.5 sen on Friday, valuing it at RM85.5 million. The counter, which was listed on the Bursa Malaysia’s ACE Market in July last year, has gained 8% against its initial public offer price of 19 sen.