Borneo Oil Bhd has agreed to MT 23 Resources Ltd for the acquisition of a total of 19,548,750 ordinary shares representing 19.5% of the existing equity interest in Makin Teguh Sdn Bhd for a total purchase consideration of RM50.7 million.
MT 23 Resources Ltd is the legal and beneficial owner of 29.93% of the equity in MTSB represented by 30 million shares of the issued and paid-up share capital of the company. The company is in the business of manufacturing and trading clinker, cement, and related products with a paid-up capital of RM100.25 million. It has also been granted a Manufacturing License issued under the Industrial Co-ordination Act, 1975 for the manufacturing of clinker and cement at Ulu Segama Lahad Datu, Sabah and owns an integrated clinker and cement plant at Lahad Datu, Sabah, East Malaysia.
Borneo says the price justification was based “on a willing-buyer-willing-seller” and after taking into consideration the valuation of RM263 million as per the valuation report prepared by an independent professional value. The net tangible assets of the company are RM195,286,261 as per the audited report for the financial year ended 30 June 2021.
Being already the owner of the largest private limestone reserves of cement grade quality in Sabah, Borneo Oil has heavily invested in this resource and views the acquisition as part of its future growth prospects and expansion plans.
On prospects, the outlook for Sabah’s clinker and cement industry is favourable given the high cement prices in Sabah compared with the rest of Malaysia and ILPP’s proximity to the Brunei – Indonesia – Malaysia – Philippines East ASEAN Growth Area (BIMP-EAGA). The already high price of cement in Sabah has been made worse in recent months due to the drastic increase in logistics costs and fluctuation in foreign exchange rates.
The State of Sabah has an annual demand of between 1.2 million to 1.4 million metric tons of cement per year. This does not include the future development projects planned on the East Coast of Sabah, and the demand in the BIMP-EAGA region with close proximity to the East Coast of Sabah.
