KUALA LUMPUR: My EG Services Bhd's (MyEG) acquisition of an extra 10 per cent stake in S5 Holdings Inc ftom Merrington Assets Ltd is not expected to have a material impact to the company's 2022 and 2023 earnings, Affin Hwang Capital said.
The firm said it was neutral on the proposed acquisition - the deal valued S5 at RM865 million, a tad below the implied valuation of RM900 million when MyEG acquired a 10 per cent-stake from Merrington Assets in June 2020.
"The transaction values S5 at 30.3x FY06/20 PER (price earnings ratio) and 13.7x FY06/19 PER," it said in a note today.
MyEG recently announced that the group had entered into a share sale agreement with S7 Holdings Sdn Bhd (S7) for the acquisition of 10 per cent of S5 for RM86.5 million.
S7 is the major shareholder of S5 with a 76.38 per cent-stake.
The other shareholder of S5 is Avocat Sdn Bhd (3.62 per cent).
MyEG had in June 2020 acquired a 10 per cent-stake in S5 from Merrington Assets for RM90 million.
S5 is a global integrated security solutions provider to governments and enterprises.
S5 provides the expertise and solutions to meet national challenges in homeland security, defense, and intelligence, areas of vital importance to national interests.
MyEG said it saw potential synergistic benefits arising from the proposed acquisition and the company was positive on the future growth prospects of S5 and the favourable outlook of digitalisation of government services.
Affin Hwang has maintained its "Buy" call on MyEG, with an unchanged target price of RM1.47.