KUALA LUMPUR: Xin Hwa Holdings Bhd has proposed to acquire a 79% stake in Micron Metal Engineering Sdn Bhd for RM19.75mil.

       The integrated logistics services provider, in a filing with Bursa Malaysia, said it had entered into a conditional share sale agreement (SSA) with Hoon Eel An, Chia Ming How and See Kai Mun for the proposed acquisition.

       Xin Hwa said the purchase would be satisfied via a combination of cash amounting to RM16.75mil and issuance of new Xin Hwa shares amounting to RM3mil.

       It will issue 10.51 million new shares in Xin Hwa at an issue price of RM0.2855 per consideration Share based on the 5-day volume-weighted average market price, with the aggregate value of the consideration shares amounting to RM3mil.

       Xin Hwa said the purchase consideration was arrived at on a willing-buyer willing-seller basis, after taking into consideration the cumulative profit guarantee totaling RM4.5mil in profit after tax (PAT) provided by the vendors for three financial years ending Dec 31, 2022-2024.

       Based on the cumulative profit guarantee of RM4.5mil or an average of RM1.5mil per year, this represents an implied forward price-to-earnings (P/E) multiple of 16.7 times.

       Meanwhile, Xin Hwa has also granted a put option to the vendors for the sale of the remaining 21%-stake at similar valuation, with the option period of two years effective from Jan 1, 2025.

       Managing director Ng Aik Chuan said the proposed acquisition shall generate additional income stream to the group.

       “Micron has an established and robust financial track record for the past three financial years up to the financial year ended Dec 31, 2021 while consistently generating positive net operating cash flow.

       “The current leadership of Micron will remain and steer the company forward with the guidance from our board and management. The new income stream is set to elevate our bottom line and accelerate the performance recovery of Xin Hwa,” he said.

       The proposed acquisition is subject to approvals from Bursa Malaysia Securities Bhd and shareholders of Xin Hwa at an extraordinary general meeting to be convened.

       Barring unforeseen circumstances and upon meeting all the conditions

       precedent, the exercise is expected to be completed in the third quarter of 2022.