KUMPULAN Perangsang Selangor Bhd (KPS) is acquiring the entire stake in computer numerical control (CNC) machining company, MDS Advance Sdn Bhd, for RM85 million.
“The purchase consideration of RM85 million values MDS Advance within the industry benchmark in terms of enterprise value to earnings before interest, tax, depreciation and amortisation (EV/Ebitda) ratio of 7.9 times, which will be fully satisfied by internally generated funds,” it said in a statement today.
KPS wholly owned unit, Perangsang Dinamik Sdn Bhd, today signed a conditional share sale agreement with the vendors Gan Lian Ban and Chuah Mooi Kheng. MDS Advance will become KPS’ indirect wholly owned subsidiary upon completion of the proposed acquisition.
MDS Advance is involved in a high-precision CNC metal machining business, which involves metal cutting and milling. Its operations are spearheaded by its founder Gan.
KPS MD/group CEO Ahmad Fariz Hassan said the acquisition would further strengthen the group’s core manufacturing business to move towards higher margin products, in line with long-term business strategy for sustainable growth.
“The transaction fits well with KPS’ investment criteria. Firstly, MDS Advance serves mature and non-cyclical industries that have been growing with population, consumerism trends and income growth. Furthermore, 90% of its revenue stream has been supported by long-term customers,” he said in a statement today.
“Secondly, it is profitable and cash-generating, consistently generating strong Ebitda and double-digit PAT (profit after tax) margins even amid the challenging market conditions in recent years.
“Thirdly, MDS Advance will be a strategic addition to KPS’ current portfolio, which comprises subsidiaries involved in injection moulding and EMS (electronic manufacturing services) businesses,” Ahmad Fariz added.
Moving forward, KPS said, MDS Advance will continue to grow its business and acquire a broader clientele base to maintain a sustainable revenue stream.
Its short-term value creation plan includes maximising in-house production. Over the medium and long term, it looks to expand its capacity and focus on automation to improve the overall process efficiency; it is currently undergoing an expansion to double its size, which is expected to be completed in the first quarter of 2023 (1Q23).
“This expansion will facilitate further growth in its market reach, alongside its other new investments in relevant technologies,” KPS said.
Barring any unforeseen circumstances, MDS Advance is expected to contribute positively towards KPS’ financial performance upon completing the proposed acquisition by the end of 1Q23.
KPS’ shares today closed one sen, or 1.29%, higher to settle at 78.5 sen, with a market capitalisation of RM422 million. — TMR / pic source: kps.com.my
Corporate results: Gadang Holdings, M3 Technologies, Gas Malaysia, TransOcean, KPS and OPUS Consultants