LTKM ventures into EMS business and divests poultry operations
KUALA LUMPUR: LTKM Bhd presented a series of proposals to divest its existing business to its major shareholder and move into the provision of electronics manufacturing services (EMS) through the acquisition of Local Assembly Sdn Bhd.
In a statement, loss-making LTKM proposed that its major shareholder, Ladang Ternakan Kelang Sdn Bhd, acquire its chicken egg business for RM158.83 million.
This was accompanied by a proposed special dividend and return of capital of RM1.1098 per share to shareholders in the amount of RM158.83 million, the proceeds of which will be used by Ladang Ternakan Kelang to satisfy its purchase of operations.
Meanwhile, LTKM has also offered to acquire a 100% stake in the Local Assembly for RM336 million, which will be satisfied via treasury of RM100 million and the issuance of 393.33 million new shares. LTKM at an issue price of 60 sen each.
The sellers will provide a profit guarantee of a minimum profit after tax (PAT) of RM28mil for the financial year ending 31 December 2022, or not less than a total of RM50mil PAT for the financial years ending 31 December 2022 and 2023.
Based on the guaranteed PAT of RM28.00 million for the year ended 31 December 2022, the purchase consideration represents a multiple of price to earnings of 12 times.
Following the acquisition, there would be a proposed restricted issue of 230 million new LTKM shares at an indicative issue price of 60 sen each, representing 33.1% of LTKM’s expanded share capital to investors yet to be identified. .
Following the share transfer and restricted issue, the sellers of Local Assembly – including Chai Voon Sun, Gurmakh Singh Ajmer Singh, Wee Thian Song, Divine Inventions Sdn Bhd and Proven Venture Sdn Bhd – will become the new majority shareholders of LTKM with a 56.5% stake in the company.
Datuk Seri Chiau Beng Teik, Executive Chairman of Chin Hin Group Bhdwill become the main shareholder of LTKM by virtue of its participation in Divine Inventions.
LTKM proposed that the company name be changed to LA Technology Bhd after the completion of the financial year.
“Fundamentally, the proposals are intended to reward our shareholders for the proceeds from the divestiture of the company’s existing poultry business while allowing them to continue to participate in the new EMS business after the proposals,” said LTKM Executive Chairman, Datuk. Tan Kok in a statement.
He said the proposed divestment comes amid a challenging operating landscape that has impacted the company’s ability to pay dividends over the past two years.
These challenges for the poultry industry, he said, include overcapacity, declining average selling price of eggs, high raw material prices and difficulty in controlling disease outbreaks.
“Along with the proposed divestments, we believe the proposed acquisition of the EMS business is an opportunity to create value for our shareholders through a viable and profitable business,” he added.
Local Assembly, which began operations in 2000 and whose main markets are Malaysia and Singapore, is a manufacturer of electronic, electrical and plastic injection molded components, and a contract assembler of electrical appliances and equipment.
For the year ended 31 December 2022, the Local Assembly achieved a PAT of RM20.06 million through revenue of RM116.35 million.
According to LTKM, the application for the proposals should be submitted to the relevant authorities by the second quarter of 2022.
Subject to regulatory and shareholder approvals, LTKM expects the proposals to be completed in the first half of 2023.