THE acquisition of a 10% stake in S5 Holdings Inc is “earnings accretive”, said MyEG Services Bhd.
The RM90 mil purchase consideration, said MyEG in a bourse filing today, was considered to be “fair and reasonable.”
Based on the RM90 mil purchase consideration and S5’s net profit of RM6.32 mil (based on 10% equity interest to be acquired), the implied price-to-earnings (PE) multiple of the proposed acquisition is approximately 14.23x, said MyEG.
The group said earnings per share (EPS) of the company was RM0.086 for the latest audited 15-month financial period ended Dec 31, 2019 (calculated based on net profit of RM303.09 mil divided by the weighted average number of shares of approximately 3,532.28 million MyEG shares) and on an annualised basis, the EPS of S5 was about RM0.069.
The PE multiple implied by the issue price of RM1.20 per consideration share is about 17.39x (calculated based on the issue price divided by the annualised EPS), said MyEG.
Compared to the PE multiple of 14.23x as implied by the purchase consideration, the issue price represents a higher PE multiple of approximately 17.39 times, it added.
MyEG said that for its acquisition, RM75 mil would be paid for with internally generated funds while the remainder would be paid with consideration shares from MyEG.
The full payment is to be made to Merrington Assets Ltd, who is selling that portion of its stake, upon the completion of the deal.
Merrington has also nominated AIX Shares Sdn Bhd, a wholly owned subsidiary, to receive the consideration shares in full.
At the market close, MyEG’s shares moved up 1.43% to RM1.42. – June 30, 2020