Destini to Buy Firm for RM90m to Venture Into Paramilitary Boat Business
KUALA LUMPUR (July 23): Destini Bhd plans to acquire a unit of Destination Marine Services Sdn Bhd (DMS), which will be injected with a RM381.30 million boat building project that DMS secured from the Malaysian Maritime Enforcement Agency (Agensi Penguatkuasaan Maritim Malaysia (APMM)), for RM90 million, to venture into the paramilitary boat business.
Destini said the proposed acquisition 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, according to Destini’s filing to Bursa Malaysia today (for the remainder RM75 million).
DMS received the said project from APMM in June for the supply, delivery, testing and commissioning of six patrol vessels to APMM for 35 months — which DMS will novate to Everyday Success.
It will also transfer its shipyard facilities in Klang, Selangor, to Everyday Success to facilitate the implementation of the project.
Additionally, DMS shall procure for Everyday Success all approvals, licenses and documentations necessary for Everyday Success to carry on the business of shipbuilding, 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 today to effect the acquisition of Everyday Success from DMS, which is conditional upon the fulfilment of the terms (conditions precedent) above in the next six months.
Pursuant to the SSA, DMS also undertakes and guarantees 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.
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.
It is currently in the marine safety and survival business and manufacturing of life boats and davits systems, apart from the provision of maintenance, repair and overhaul servides (MRO).
The new shares issuance will increase its share base up to 1.173 million shares or RM117.34 million.
Destini said Everyday Success, currently dormant, also plans to provide shipbuilding and ship repair services to the global paramilitary forces in the near future.
“The management of Everyday Success believes that Everyday Success is well positioned to operate as a full-fledged shipbuilding and ship repair company in view of the above mentioned prospects of Everyday Success and in light of the positive outlook of the shipbuilding and ship repair industry,” the filing stated.
Besides consideration of the profit guarantee, the purchase price also represents a price to earnings ratio (PER) of 7.2 times, it added.
The project is expected to contribute to Everyday Success earnings until May 2018, on top of future earnings that are expected from the injected assets from DMS, it said.
Destini expects the proposed acquisition — subject to the approval of its shareholders at an extraordinary general meeting to be convened — to be completed by the fourth quarter of 2015.
Destini (fundamental: 1.7; valuation: 1.1) shares closed unchanged today at 59.5 sen, with a market capitalisation of RM468.54 million.
(Note: The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations