KUALA LUMPUR (Dec 19): Pentamaster Corp Bhd (KL:PENTA) on Thursday proposed to privatise its 63.9%-owned Hong Kong-listed Pentamaster International Ltd (PIL) with a partner in an exercise that would raise its stake to 71%.
The announcement confirms The Edge Malaysia’s report on Dec 9, quoting a market observer, that the Penang-based automated test equipment company was mulling to take PIL private.
The exercise entails Main Market-listed Pentamaster and partner Puga Holdings Ltd acquiring a 7.1% and 29% stake, respectively, in the HK unit, at HK$0.93 per share (RM0.54), a premium of 16.25% to its last traded price of HK$0.80 (RM0.46) before its trading suspension on Dec 4.
The HK-listed PIL will also issue a special dividend of HK$0.07 per share (RM0.04) to its shareholders totalling HK$168 million, and cancel its shares not held by Pentamaster at HK$0.93 per share, to pave the way for the privatisation.
This means PIL's minority shareholders will get HK$1 per share upon exiting the company, leaving Pentamaster with a 71% stake and Puga with a 29% stake in PIL.
At HK$0.80 per share, PIL was trading at historical price-to-earnings ratio (PER) of 8.79 times.
The 7.1% additional stake acquisition at HK$0.93 per share will cost Pentamaster HK$158.47 million (RM91.8 million) and values PIL at HK$2.23 billion (RM1.29 billion) or trailing PER of 10.8 times, based on 2.4 billion outstanding shares in the company. Pentamaster itself last traded at a historical PER of 41.8 times.
Pentamaster said it intends to use its internal resources to fund the acquisition. As at end-September, Pentamaster's cash stood at RM466.73 million, with no borrowings in the company.
The deal provides Pentamaster International's other shareholders "with an opportunity to monetise their investments at a significant premium to the market price", Pentamaster said.
They can also "fully realise their investments during a period when the Pentamaster International shares have experienced consistently low trading volumes over a prolonged period", it added.
A look at Pentamaster and PIL’s latest financial statements reveals that PIL is the main contributor to Pentamaster’s earnings.
For the first nine months ended Sept 30, 2024 (9MFY2024), PIL’s net profit stood at RM88.8 million, down 18% from a year earlier, on the back of a 5.8% decline in revenue to RM492.18 million.
Pentamaster, meanwhile, posted a 25.4% year-on-year drop in net profit to RM51.05 million for 9MFY2024 on the back of a 5.8% decline in revenue to RM492.18 million.
The other shareholders of PIL are Fidelity International with a 5.06% stake, its employees (4.53%) and a public float of 25.04%. Pentamaster co-founder and executive chairman Chuah Choon Bin holds 1.11% equity interest in PIL and a 19.7% stake in Petamaster.
Pentamaster’s shares, which surged to a three-month high on Dec 4 after PIL's stock was suspended, settled nine sen or 2.18% higher at RM4.21 on Thursday, giving the group a market capitalisation of RM3 billion.