AWC to buy M&E companies

PETALING JAYA: AWC Bhd has proposed to acquire the entire stake in Qudotech Sdn Bhd and DD Techniche Sdn Bhd for RM26.5 million, through a combination of cash and issuance and allotment of new ordinary shares of par value 30 sen each in AWC.
Qudotech is principally involved in mechanical and electrical (M&E) engineering works, specifically in all manners of plumbing works, while DDT is principally involved in the contracting for mechanical engineering works, the design of piping and systems for rainwater harvesting products and trading of specialised water tanks and rainwater harvesting products.
AWC said the cash portion of RM14.85 million of the total purchase consideration will be funded via internally generated funds.
"The proposed acquisition will provide the AWC group with the opportunity to expand its existing suite of engineering and facility management services to include the businesses of the target companies, being one of the leading providers of plumbing services and rainwater harvesting solutions in Malaysia," AWC said in a filing with the stock exchange.
It will allow AWC group to leverage on the strength and technical expertise of the target companies, thus enhancing the group's overall competitiveness when tendering for new projects in both the private and public sector.
The Qudotech group's outstanding secured contracts stood at RM66.11 million, which shall provide earnings visibility up to June 2017. In addition, the Qudotech group had recorded a profit after tax and minority interest (patami) of RM1.72 million for Dec 31, 2014 while DDT had recorded a profit after tax (PAT) of RM454,551 for the financial year ended July 31, 2014.
Coupled with the existing secured contracts of Qudotech group and the profit guarantee, the proposed acquisition is expected to enhance the future earnings potential of the AWC group and ultimately increase AWC shareholders' value in the medium to long term.
Upon completion of the proposed acquisition, the target companies will become wholly-owned subsidiaries of AWC group, allowing AWC to consolidate the profits of the target companies.
The issuance of the consideration shares to part satisfy the purchase consideration will lessen the cash outlay of the AWC group for the proposed acquisition and will provide the group with flexibility to utilise its existing financial resources to pursue other opportunities. In addition, issuance of the consideration shares will strengthen the financial position of the AWC group.
The exercise is expected to contribute positively to the future earnings and earnings per share of the AWC group as the target companies are profitable companies with good financial track record.
In addition, the vendors had provided a cumulative profit guarantee of RM7.8 million, of which RM3.9 million is expected to be realised in the 12 months to the financial year ended June 30, 2016 and RM3.9 million is expected to be realised in the 12 months to the financial year ending June 30, 2017. Upon completion of the proposed acquisition, AWC will be able to consolidate the profits of the target companies.
Assuming the proposed acquisition had been completed on July 1, 2013, the profit attributable to the owners of the AWC group for the financial year ended June 30, 2014 would increase from RM6.95 million to RM10.85 million.
Barring any unforeseen circumstances and subject to all relevant approvals being obtained, the proposals are expected to be completed by the fourth quarter of 2015.