The business has gained momentum with the govt’s push to roll out commercial 5G services by year-end
by LYDIA NATHAN / pic source: HB Global
HB GLOBAL Ltd is expected to work on potential projects worth RM1.1 billion following its 60% stake acquisition in Forward Resources and Construction Sdn Bhd (FRC) for RM66 million.
In a statement released yesterday, the China-based company said FRC is the only company in Malaysia that lays fibre optic cables using robotic services installed through the national sewerage system.
HB Global ED Lee Ping Wei said FRC is mainly involved in the provision of construction and engineering solution services, including 5G infrastructure, for the telecommunications industry with notable clients including Maxis Bhd, DiGi.Com Bhd and Telekom Malaysia Bhd, among others.
“Given the demand for fibre optic cable, the business has gained momentum with the government’s push to roll out commercial 5G services by year-end. We are confident HB Global is in a strong position to secure some of these contracts with the telecommunications players,” he said.
Lee added that the sewerage system is the most effective channel to lay telecommunications cables because every household uses it, and FRC has the capability to do it.
Lee said the RM66 million purchase consideration will be satisfied via cash of RM12 million and the issuance of 208.4 million new HB Global’s shares at an issue price of 25.9 per share.
The vendors of FRC, Lawrence Lean and Lee Sek Ang will provide a cumulative profit guarantee of RM20 million for two years, also known as the profit guarantee period.
Post-acquisition, both vendors will hold 9% and 18% in the company respectively.
“Based on the secured project and projects-to-be secured, FRC is expected to generate total revenue of RM555 million in the profit guarantee period. All the projects under FRC will have gross profit margins of between 10% and 20%, mainly due to the patented state-of-the-art Swiss-German technology that FRC possesses,” he said.
Lee noted that the company has proposed to diversify into construction and engineering solutions services, where FRC is expected to contribute more than 25% of its profits in the future.