Globaltec expects listing to provide better access to larger-scale business

Come Thursday, Globaltec, which comprises of 5.27 billion shares of 10 sen each and a paid up capital of RM527.36mil, will be listed at an initial public offering (IPO) price of 12 sen per share. At this price, the stock will have a market capitalisation of RM632.84mil.

It's safe to say that the purpose of the merger is to give the new listed entity size. Previously, the individual companies of AIC, Jotech and AutoV were small at paid-up capitals of RM173.87mil, RM92.43mil and RM58.36mil respectively.

Last July, Globaltec, a special-purpose company controlled by Datuk Goh Tian Chuan, who is group executive chairman of Jotech and AIC, submitted the proposed merger offer simultaneously to AIC, Jotech and AutoV to collectively acquire the business and undertakings of all the three companies for RM711mil to be satisfied via the issuance of new Globaltec Formation shares.

Goh owns a 7.6% stake in Jotech, 25.2% in AIC and 0.4% in AutoV. The acquisition price of Jotech, AIC and AutoV were RM217.3mil, RM339.2mil and RM154.4mil respectively. In the new entity, Goh will have a 16.7% stake, which he eventually hopes to raise.

“We expect to have better access to larger scale business opportunities, and an enhanced ability to raise funds in both debt and equity markets as a result of an improved balance sheet position. A larger and stronger balance sheet will allow us to undertake larger manufacturing contracts and to capitalise on growth opportunities domestically and internationally,” said the company in its prospectus.

Following the merger of these three companies, the business segments will be divided into two integrated manufacturing services and resources.

Goh himself will be heading the resources division and already has plans to beef up the division in the immediate term.

He has earmarked oil palm plantations for expansion with the intention of moving down the value chain by acquiring more oil palm plantations to justify constructing an oil palm mill in Sabah.

“We see plantation as an important growth segment. Right now, our hectarage is small. For starters, we want to enlarge this by at least five times. We are seriously looking for more plantation land in Sabah,” said Goh.

Its palm oil plantation activities are carried out by its subsidiaries, namely Cergas Fortune Sdn Bhd and Malgreen Progress Sdn Bhd. It has about 916.25ha of plantations situated at Sandakan Lahad-Datu Highway, Kinabatangan Sabah with about 836.96ha of planted oil palm.

The approximate planted ages of the trees range from four to 14 years. As of Dec 31, 2011, the net book value of the oil palm plantations was RM30.39mil.

Currently, the combined businesses of the three companies consist mainly of precision metal stamping and tooling, semiconductor, precision tooling an automation and automotive components manufacturing. It has palm oil plantation and coal mining, but for now, contributions are minimal.

The largest revenue contributor in the group was metal stamping and tooling with a 32.1% contribution to topline, followed by semiconductor with a 30.48% contribution, automotive components with a 25.75% contribution and precision tooling with an 11.45% contribution as of 2010.

For its year ended Dec 31, 2010, the company recorded income of RM27.33mil from RM16.55mil a year earlier on revenue of RM394.84mil from RM331.8mil previously.

Under an agreement, Concord had assigned the exclusive rights to provide all coal mining and sales services in the mining area to PT Sarana Rockhill Resources, a subsidiary of Rockhill. For now, the extraction and marketing of coal has yet to commence.

Meanwhile, the share swap determined earlier valued Jotech shares at 18 sen each, AIC shares at RM1.80, AutoV shares at RM2.38, Jotech warrants at 9 sen and AIC warrants at RM1.00.

Based on this scenario, the proposed swap ratios are three new Globaltec shares for every two existing Jotech shares, 15 new Globaltec shares for every existing AIC share, 119 new Globaltec shares for every six AutoV shares, three new Globaltec shares for every four existing Jotech warrants and 25 new Globaltec shares for every three existing AIC warrants.