MAIN market-listed tiles manufacturer and information technology outfit YB Ventures Bhd has completed its investment into Prolexus Bhd and is now the largest shareholder of the apparel manufacturer if the company’s stake and that of its executive director Datuk Au Yee Boon’s stake are combined.
The Group has an indirect interest of 18.3% or 48.90 million shares in Prolexus while Au holds 5.99% or 16.02 million shares.
“We are confident that the investment into Prolexus will derive synergies and create values for both companies in FY2022 and FY2023,” commented Au.
“Both YB Ventures and Prolexus have strong capabilities in their manufacturing arms and we believe that the asset rationalisation and sharing of expertise and experience will push forward our ambition to embrace smart manufacturing.”
According to Au, the shift towards Industrial 4.0 will improve production efficiency, leading to a better economy of scale and driving a higher profit margin for both companies.
Aside from that, there are similarities between YB Ventures and Prolexus as both the companies are pushing forward their self-developed brands.
“At YB Ventures, we have our own negative ions tiles brand ‘Talos Living Tiles’ which serves as functional tiles to improve indoor air quality while Prolexus has launched its own brand, ‘Arumn’ which is a crafted modest wear brand that women across all ages can experience without compromising style,” Au pointed out.
“As both companies shared their experience on branding, this will help to elevate the brand values of their products.”
While some of the initiatives to improve research & development (R&D) capabilities, cost savings, improvement in procurement processes and even a shift towards solar energy for manufacturing plants would be shared across, Au noted that both corporates will operate independently in terms of operations and financials.
“As an example, the solar initiatives for YB Ventures’ plant in Kulai, Johor can save at least 20% of electricity per month and could also help to escalate the shift towards renewable energy sources for Prolexus. These initiatives align with both companies’ ESG (environmental, social and governance) agenda,” he added.
Profitable
Au is of the view that YB Ventures’ investment in Prolexus is timely given its apparel business is expected to pick up in tandem with the global economic recovery as international borders re-open.
Positively, Prolexus has managed to maintain its profitability over the last two years despite the impact of COVID-19 pandemic and disruption to its business operations. The company posted a net profit of RM16.7 mil on the back of RM227.5 mil revenue for its financial year ended July 31, 2021.
“The recovery of demand for apparel and foreign workers’ return will accelerate YB Ventures’ initiatives to realise synergies from its investment,” projected Au.
“On top of that, Prolexus has a strong economic moat to withstand the global economic uncertainty with its large pile of cash. As of end-January this year, Prolexus has RM104.6 mil of cash and cash equivalents.”
YB Ventures has also on April 11 obtained the approval from Bursa Malaysia Securities Bhd for its bonus issue of up to 749.32 million free warrants (maximum scenario) on the basis of one warrant for every two existing ordinary shares held on an entitlement date to be determined later.
“This is as an attractive corporate exercise to reward our loyal shareholders, enabling them to have greater participation in a derivative of YB Ventures without incurring any cost,” opined Au.
“On the other hand, the five-year convertible warrants upon being exercised, will provide us with additional working capital and allow the group to obtain proceeds without incurring interest expenses as compared to bank borrowings.”
At 10.30am, YB Ventures was down 0.5 sen or 1.14% to 43.5 sen with 44,600 shares traded, thus valuing the company at RM127 mil while Prolexus was down 1 sen or 1.8% to 54.5 sen with 134,800 shares traded which gave the company a market capitalisation of RM151 mil. – April 25, 2022
