SMTrack to raise funds for US venture

CYBERJAYA: Ace Market-listed SMTrack Bhd is looking to raise as much as US$6.2 million (RM20.27 million) for its expansion into the traceability bottling business in the US either through local or US stock markets.
Speaking at a press conference here yesterday, its CEO Yow Lock Sen (pix) said a share placement or rights issue are just some of the options the company is looking at, but is yet to come to a decision.
"We've spoken to our investment bankers, they expressed confidence that we can raise this amount through a placement or a rights issue.
Currently we're looking at the Malaysian market (for fund raising), but if somebody wants US shares, I don't see why not," he said, adding that the group would be able to entice investors into taking up its shares.
As at June 30, the group's cash and cash equivalents stood at RM4.13 million.
On Tuesday, SMTrack announced that it was venturing into the traceability bottling business in the US by acquiring a 100% and 75% stake in MRH Capital Inc. and California Bottling Company Inc. (CBC) respectively via a share swap of 40 million new shares in US-listed Smartag International Inc. (SII), a 94%-owned subsidiary of SMTrack.
SMTrack will own a majority stake of at least 51% stake in the enlarged entity in SII.
A revenue and pre-tax profit guarantee will be given by the vendors, Michael Maragh and Marc Thomas, of not less than US$200 million and US$13 million for the next three years on an aggregated basis in the enlarged SII.
This would be in exchange for a financial commitment of up to US$6.2 million (RM20.27 million) to fund the working capital and expansion plans of the enlarged beverage business by SMTrack.
According to Yow, the combined MRH and CBC would have an estimated three-year pre-tax profit of US$13.84 million by FY17, which in turn ensure the profitability going forward.
The agreement, at the same time, will enable SMTrack to fast track its core traceability business in designing and commissioning one of the very first embedded traceability bottling plant.
It will also be able to export exclusively all niche healthy drinking water, especially to China with traceability bottling.
Meanwhile, Yow is hopeful that the group will return to the black in FY15, helped by its overseas expansion plans.
"In order to turnaround, we need a quantum leap approach, we can't just depend on organic growth, we're expanding into the US, China and Saudi Arabia," he noted, adding that the group is close to finalising a deal in Saudi Arabia which is related to the traceability of freight management.
Yow also said the group is targeting to achieve more than 60% of its revenue from the overseas markets in FY15 in order to boost its business growth.
"We're seeing revenue from the US but it's not enough, most of it (the revenue) is from Malaysia," he added.
SMTrack has been in the red since its listing in April 2011. For the nine-month period ended June 30, 2014, SMTrack reported a slightly lower net loss of RM5.37 million versus RM5.38 million in the previous corresponding period.