KUALA LUMPUR: Bamboo flooring manufacturer Kanger International Bhd is upbeat about its prospects, mainly driven by its acquisition of a 51 per cent stake in building materials supplier Sung Master Holdings Sdn Bhd for RM94.8 million.
"The acquisition of Sung Master will positively enhance our financial performance as Sung Master is a profitable company. For the full-year (ended June 30 2021), we expect Sung Master to deliver an estimated net profit and revenue of about RM20.0 million and RM115.0 million respectively," said Kanger executive director Steven Kuah Choon Ching said.
Kanger said Sung Master had consistently delivered a profitable performance over the past three financial years (FY), from FY ended January 2018 up to the audited 17-month of FY ended June 2021 and the latest unaudited 10-month ended April 2021.
Moreover, Sung Master even paid out dividends totaling RM25.0 million during the periods.
It has also consistently recoded double-digit gross profit margin for the past two financial years with low gearing of 0.63 times and also strong current ratio of 2.4 times , suggesting strong operating cashflow.
For the latest 10-month ended April 30 2021, Sung Master reported an unaudited net profit of RM11.8 million against revenue of RM76.0 million.
Sung Master is mainly involved in the sales and trading of building materials, which include timber flooring, tiles, bulk cement, concrete, locksets and sanitary ware.
Its clients consist of property and construction players as well as engineering consultants.
Kanger recently diversified into the construction business and the acquisition of Sung Master is part of the group's growth strategy to enhance its competitive advantage when bidding for new projects in the construction industry.
"By leveraging on Sung Master's existing network of suppliers, we can source for building materials at relatively competitive prices. This will lead to greater cost efficiencies when tendering for new projects," Kuah said.
Kanger is currently working on construction projects with a combined orderbook of about RM1.0 billion.
It is applying for the Grade 7 contractor licence from the Construction Industry Development Board which will enable it to undertake construction projects of any value.
Kanger has also expanded its portfolio of investment properties with a RM142.9 million acquisition of 126 service apartments units in Antara @ Genting Highlands.
The development of the properties are expected to be completed by 2024.
"Once the service apartment units are completed, the properties will bring in a steady flow of recurring income by way of receiving rental income. "Furthermore, we will also benefit from capital gains when the properties are sold, as we managed to buy these units en-bloc at an attractive price."
"Genting Highlands is an attractive tourist destination for local and international travelers. We are confident that these apartment units will be in high demand once travel restrictions are lifted and tourism activities return to normal," Kuah said.
Kanger's existing bamboo business has been disrupted by the lockdowns in China and Malaysia due to the Covid-19 pandemic which affected sales in the last year.
"We took this time to explore and identify various opportunities to expand our revenue portfolio into new areas that are complementary to our core competencies. In addition to property investment, we also decided to diversify into the construction business," he said.
Kanger is currently undergoing a renounceable rights issue with warrants on the basis of one rights share for every existing share, together with one free detachable warrant for every one rights share subscribed.
At an issue price of RM0.06 per rights share, the exercise could raise gross proceeds of up to RM20.0 million under the minimum case scenario and RM171.7 million under the maximum case scenario.
"We are putting the group on a stronger and resilient foundation and hope our shareholders share in our vision. With the rights issue exercise, our shareholders will have the opportunity to participate in the prospects and future growth of our group," Kuah said.