MAIN Market-listed HB Global Ltd has received resounding approval from its shareholders to proceed with the ‘lucrative’ acquisition of 60% stake in Forward Resources and Construction Sdn Bhd (FRC) for RM66 mil.
This follows FRC’s inking of two separate agreements on June 24 with regard to the award of two tendered projects worth RM370 mil and RM701 mil respectively.
The job scope includes the supply, delivery, installation, testing, commission, operation, maintenance, and deployment of the 5G infrastructure and solutions across Malaysia. FRC which has been appointed the independent contractor expects both projects to be completed within three years.
At its extraordinary general meeting (EGM) yesterday, HB Global received 99.99% approval from its shareholders who voted in favour of FRC’s acquisition and the proposed diversification of the company to include the provision of construction and engineering solution service.
“The approval is an important milestone as FRC’s acquisition presents a strong and stable alternative income stream to the group,” commented HB Global’s executive director Lee Ping Wei.
“We are thrilled that it is now finally approved by the authorities and shareholders. This is part of our strategies to reduce our reliance on the existing food business.
“The venture will help both HB Global and FRC to fulfil its potential and capabilities in the development of the 5G infrastructure in Malaysia.”
Based on a margin of between 15% and 20%, FRC will recognise gross profit of RM150 mil to RM200 mil from these two projects. The high margin is attributable due to the patented, state-of-the-art Swiss-German technology that FRC possesses.
Moreover, FRC will also provide a cumulative profit guarantee of RM20 mil for two years.
Founded in 1993, FRC is mainly involved in the provision of construction and engineering solution services, including 5G infrastructure for the telecommunications industry.
Some of its notable clients are Maxis Bhd, Celcom Axiata Bhd, DiGi.com Bhd, Telekom Malaysia Bhd, edotco Group Sdn Bhd and Dagang NeXchange Bhd.
Given the demand for fibre optic cable, the 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.
Additionally, Lee is very excited with HB Global’s diversification into construction and engineering solution services which offer a new revenue and income stream for the group.
To him, projects in these areas offer a long-term earnings growth potential for HB Global that is both sustainable and profitable.
“They provide visibility on the group’s earnings and cash flow generation from FY2021 to FY2027,” he enthused. “We envision that HB Global will transform itself to be a high-dividend pay-out company in the near future, supported by the strong recurring income from the projects.”
At the close of trading yesterday (June 25), HB Global was down 0.5 sen or 1.28% to 38.5 sen with 33.65 million shares traded, thus valuing the company at RM216 mil. – June 26, 2021