KUALA LUMPUR: INSTACOM Bhd is riding high on its enlarged order book following its purchase of an additional 43.6 per cent stake in Neata Aluminium (Malaysia) Sdn Bhd, which also comes with a profit guarantee of at least RM34 million over the next two years.
The company’s order book currently stands at RM1.9 billion.
Its executive director Choo Seng Choon said the stake acquisition would enable Instacom to diversify and broaden its business base and, hence, its earnings capabilities.
“The Instacom group’s enlarged order book is healthy and the pipeline of tenders we have participated in are massive.
“We are confident of emerging from the acquisition stronger and more solid than ever with new revenue streams set to kick in,” Choo told Business Times in an interview over the weekend.
Sarawak-based Instacom is currently finalising the 43.6 per cent stake acquisition, which, upon completion, will raise its control in Neata to 78.6 per cent from 35 per cent.
“The appeal of this acquisition is that it comes with a profit guarantee of at least RM34 million for the forthcoming two years,” Choo said.
Neata is mainly involved in the design and fabrication of aluminium structures while its wholly-owned subsidiary, Vivocom, is engaged in civil engineering and construction.
Instacom is one of Malaysia’s leading telecom infrastructure providers with engineering feats in tower building.
The company undertakes works nationwide with focus in the Klang Valley, the northern and southern regions of Peninsular Malaysia, as well all as Sabah and Sarawak.
According to Instacom’s latest circular to shareholders, Neata has an order book of RM247 million, which will provide earnings visibility for Instacom up to March 2018.
“The acquisition of Neata and Vivocom is expected to bring various synergies to Instacom. Besides increasing Instacom’s income, it will also result in the sharing of resources and know-how, and expansion of business opportunities through cross-marketing of products and services and cross-referencing of customers within the enlarged Instacom group.”
Concurrently, with the acquisition, Instacom is also embarking on a 1-for-3 bonus issue to reward shareholders.
It is understood that the enlarged Instacom group has collectively participated in project tenders estimated to be worth RM1.9 billion.
“We are confident to be able to secure a big portion of these tenders based on the strategic relationships we have cultivated,” he added.
On Instacom’s shares, which had seen active trading and a significant price increase in the past fortnight, Choo said it could be due to the company finalising the 43.6 per cent Neata stake acquisition.
Last Friday, Instacom shares closed at 21 sen apiece on high volume for the week, almost doubling in price from a fortnight ago.
In the past two weeks, the stock had regularly been among the top 10 most actively traded counters with high follow-through buying, indicating a further upside to it.