Destini Pans RM90m Firm Buy for Paramilitary Boat Venture
KUALA LUMPUR: Destini Bhd plans to acquire a unit of Destination Marine Services Sdn Bhd (DMS) — which will be injected with a RM381.3 million boat-building project that DMS secured from the Malaysian Maritime Enforcement Agency (APMM) — for RM90 million, to venture into the paramilitary boat business.
Destini said the proposed acquisition of Everyday Success Sdn Bhd will be funded by a combination of cash (RM15 million) and the issuance of 107.14 million new ordinary Destini shares at an issue price of 70 sen apiece (for the remainder RM75 million), according to Destini’s filing to Bursa Malaysia yesterday.
The APMM project is for the supply, delivery, testing and commissioning of six patrol vessels to APMM for 35 months — which DMS will novate to Everyday Success, together with the transfer of its shipyard facilities in Klang, Selangor, to facilitate the implementation of the project. Additionally, DMS shall procure for Everyday Success all approvals, licences and documentation necessary for Everyday Success to carry on the business of shipbuilding and ship repair and to own DMS’ assets.
Destini said its wholly-owned subsidiary Destini Armada Sdn Bhd (Destini Armada) entered into a conditional share sale agreement (SSA) with DMS yesterday to effect the said acquisition, which is conditional upon the fulfilment of the terms (conditions precedent) above in the next six months.
Pursuant to the SSA, DMS will also undertake and guarantee that the aggregate profit after tax of Everyday Success for the two financial years ending Dec 31, 2015 (FY15) and FY16 shall not be less than RM25 million.
The purchase consideration also represents a price-to-earnings multiple of 7.20 times, said Destini, which, besides making and selling boats and parts, also provides maintenance, repair and overhaul services.
Destini said the acquisition will enable it to enlarge its products range and expand its supply of vessel segment as it would be venturing into the supply, testing and commissioning of paramilitary boats and related services to a different market segment.
Destini said Everyday Success, currently dormant, also plans to provide shipbuilding and ship repair services to global paramilitary forces in the near future.
It added that the APMM project will also provide earnings visibility for Everyday Success up to May 2018.
It is also expected to see future earnings from the injected assets from DMS.It expects the proposed acquisition to be completed by the fourth quarter of 2015.
Destini’s shares closed unchanged yesterday at 59.5 sen, for a market capitalisation of RM468.54 million.
This article first appeared in The Edge Financial Daily, on July 24, 2015.