HB Global Ltd is expected to have an immediate access to at least RM1.1 bil in cumulative project value following the acquisition of a 60% stake in Forward Resources and Construction Sdn Bhd (FRC) for RM66 mil.
In a circular published on Bursa Malaysia today, HB Global has also proposed to diversify into the business of construction and engineering solution services. FRC is expected to contribute more than 25% of the net profits going forward.
The RM66 mil purchase consideration will be satisfied via cash of RM12 mil and the issuance of 208,413,740 new HB Global’s shares at an issue price of 25.91 sen each.
The vendors of FRC – namely Lawrence Lean and Lee Sek Ang – will provide a cumulative profit guarantee of RM20 mil for two years. Post-acquisition, both vendors will hold 9% and 18% in the company respectively.
Based on the secured project and projects-to-be secured, FRC is expected to generate a total revenue of RM555 mil during the profit guarantee period.
“All the projects under FRC will have gross profit margins of between 10% and 20% mainly due to the patented state-of-the-art Swiss-German technology that FRC possesses,” commented HB Global’s executive director Lee Ping Wei.
“FRC is the only company in Malaysia that lays fibre optic cables using robotic services installed through the national sewerage system. Based on these projects, there are earnings visibility and cash flow generation to HB Global beginning from FY2021 to FY2027.”
Founded in 1993, FRC is mainly involved in the provision of construction and engineering solution services, including fifth-generation (5G) infrastructure for the telecommunications industry. Some of its notable clients are Maxis, Celcom, DiGi, Telekom Malaysia, Edotco and Time Engineering.
Given the demand for fibre optic cableFRC’s business has gained momentum with the Government’s push to roll-out commercial 5G services by this year-end.
Lee is confident that HB Global in a strong position to secure some of these contracts with the telco players.
“Sewerage system is the most effective channel to lay telco cables because every household uses it. And, so far, FRC is the only company in the country that has the capability to do that,” he added.
At the close of today’s trading, HB Global was up 2.5 sen or 8.2% to 33 sen with 45.72 million shares traded, thus valuing the company at RM185 mil. – June 10, 2021