AWC to buy 60% stake in rail-related services firm
Deal comes with cumulative net profit guarantee of RM20mil
BY TOH KAR INN PETALING JAYA: Integrated facilities management (IFM) services provider AWC Bhd has proposed to acquire a 60% equity interest in rail-related industry services firm Trackwork & Supplies Sdn Bhd (TWS) for a total purchase consideration of RM43.5mil.
In accordance with the conditional share sale agreement entered, the 60% stake acquisition of TWS comes with a cumulative net profit guarantee of RM20mil for the financial years 2018 and 2019, ending Sept 30.
On a year-to-date basis, TWS has an outstanding order book of RM120mil which can last the company for two years, and a tenderbook of RM600mil, which has a conservative win rate of 10%.
The purchase consideration, which represents a price-to-earnings multiple of 7.25 times of TWS forward earnings, shall be satisfied through a combination of cash amounting to RM20mil and the remaining RM23.5mil through the issuance of new ordinary shares in AWC.
In a Bursa Malaysia filing yesterday, AWC said it was also undertaking a proposed diversification of the principal activities of AWC to include rail related works.
“The company envisages that the eventual contribution arising from the proposed acquisition will be more than 25% of the net profits of the AWC group and as such will result in a diversification of AWC’s existing core business,” it said.
The proposed acquisition is expected to be completed within AWC’s current financial year ending June 30, 2018 (FY2018).
AWC CEO Datuk Ahmad Kabeer Mohamed Nagoor told StarBiz that TWS has more than 18 years experience in the rail maintenance segment, 11 international partners, and has a long working history with Malaysia’s rail net- work players and operators.
Notably, TWS, which is involved in rail welding, fabrication of points and crossings of railway tracks, rail grinding, and monitoring of maintenance effectiveness services, has worked with MRT1 and MRT2 lines, LRT Ampang Line, LRT Kelana Jaya Line, as well as several KTMB projects.
“With TWS’ history and competency in the rail industry, coupled with AWC’s IFM expertise, we are looking forward to develop a rail asset management programme soon.
“The rail asset management is an upcoming, value-added offering by AWC that not only oversees the day-to-day maintenance, but also manages the client’s opex, capex and asset life cycle maintenance.
“We have no intention to compete with the current rail players, but rather, work closely to promote rail asset management in Malaysia,” he said.
With market studies showing that there is RM150bil worth of new rail projects to be awarded soon or are in the process of being awarded, AWC has set a target to manage RM1.5bil worth of rail assets by FY2019.
Trading of AWC shares were suspended yesterday in view of the announcement and resumes today.