KUALA LUMPUR: HSS Engineers Bhd (HEB) is eyeing for potential engineering projects overseas, as it is now in a stronger position to do so following its RM270 million proposal to buy SMHB Engineering Sdn Bhd.
“One of the things that is lacking in the local industry is that we do not have the capital to compete effectively with international players.
“Now, with our scale and skillsets, we are far more strongly positioned to look in the first instance, regionally, Asean before the Middle East and India. These are our target markets internationally,” executive director Tan Sri Kuna Sittampalam said.
HEB yesterday announced that it is buying the entire stake in SMHB for RM270 million.
The acquisition paves way for HEB to strengthen its engineering consulting space in the water infrastructure sector.
The deal entails RM162 million cash, and RM108 million worth of HEB Group shares issuances to the vendors.
The cash will be raised from a 50:50 combination of bank borrowings, and placement and rights issue.
Kuna said the enlarged entity would have a substantial combined orderbook of nearly RM740 million.
“The signing of the HOA (heads of agreement) unites two leading powerhouses of the engineering consultancies in the country.
“Our combined size, engineering skills and track record will expand our scope of services as well as enhance the value proposition to clients,” he said after the signing ceremony.
The RM270 million purchase price is at an enterprise value over EBITDA (earnings before interest, tax, depreciation and amortisation) of 7.7 times.
SMHB has taken the lead role in various pivotal water sector projects locally, including the development of Sungai Selangor Phases 1, 2 and 3, the Pahang-Selangor raw water transfer project, and the strategic planning for water distribution within Selangor and Kuala Lumpur, among others.
For its year ended April 30, 2016, SMHB reported a net profit of RM25 million on revenue of RM93 million.
As a combined entity, HEB group revenue would increase to RM232 million from RM139 million, EBITDA to RM58 million from RM23 million, and net profit to RM39 million from RM14 million.
The deal is expected to be completed in the first quarter of 2018.