Logistic firm, Xin Hwa Holdings Berhad has entered into a conditional share sale agreement to acquire a 79%-stake in Micron Metal Engineering Sdn Bhd for a purchase consideration of RM19.75 million.
The group adds that the purchase consideration of RM19.75 million was arrived at on a willing-buyer willing-seller basis, after taking into consideration the cumulative profit guarantee totaling RM4.5 million in profit after tax provided by the Vendors for 3 financial years ending 31 December 2022 to 31 December 2024.
Based on the cumulative Profit Guarantee of RM4.5 million or an average of RM1.5 million 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 a similar valuation, with the option period of 2 years effective from 1 January 2025.
Having commenced operations in 2004, Micron is a homegrown precision machining components and parts manufacturer. It focuses on the manufacturing and supply of shafts, precision parts, and small metal attachments to office automation, medical equipment, and oil & gas industries.
With nearly 20 years of experience in the industry, 89% of Micron’s revenue is derived from Malaysia in 2021 while the rest is contributed by exports to Singapore. It owns and operates two manufacturing premises in Ulu Tiram, Johor with a total built-up area of 15,084 square feet.
Managing Director of Xin Hwa, Mr. Ng Aik Chuan said, “The Proposed Acquisition shall generate an additional income stream to the Group. Micron has an established and robust financial track record for the past 3 financial years up to the financial year ending 31 December 2021 while consistently generating positive net operating cash flow. The current leadership of Micron will remain and steer the company forward with 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.”
“Micron’s products are used in office automation as well as control valves used in the oil and gas industries and medical sector. We are witnessing increasing demand for these products on the back of broad-based global economic recovery post-pandemic.”
Xin Hwa is seeing a pick-up in demand for our existing logistic services with international borders having reopened in many parts of the world. All in all, it is certainly much better times ahead for the Group,” Mr. Ng concluded.”
