KUALA LUMPUR: Ecomate Holdings Bhd has announced its strategic expansion into the information and communications technology (ICT) sector through the acquisition of a majority interest in Progressive Computer Systems Sdn Bhd (PCS), marking a significant diversification from its core furniture manufacturing business.
The company entered into a definitive agreement on Friday to acquire a 60 percent stake in PCS from its sole shareholder, Law Seng Peng, for a total cash consideration of RM8.4 million. According to the Bursa Malaysia filing, the acquisition is backed by a profit guarantee, under which Law has committed that PCS will achieve a minimum profit after tax of RM3 million annually for the financial years ending 28 February 2026 through to 2028. In the event PCS incurs a loss after taxation during the guarantee period, Law is obligated to compensate Ecomate with RM1.8 million for each affected financial year, corresponding to Ecomate’s 60 percent equity interest.
PCS is engaged in the marketing and servicing of computers and related peripherals, as well as software sales, development, and programming services. For the financial year ended 29 February 2024 (FY2024), PCS recorded a profit after tax of RM2.03 million, a decline from RM4.8 million in FY2023, but marginally higher than the RM2.01 million achieved in FY2022. Revenue for FY2024 increased to RM22.65 million, compared to RM20.02 million in FY2023 and RM20.22 million in FY2022.
Ecomate stated that the RM8.4 million purchase consideration represents a price-to-earnings ratio of 2.8 times based on the guaranteed profit figures. The group expects the ICT business to contribute at least 25 percent of its earnings or result in a diversion of at least a quarter of its net assets, as it seeks to secure additional projects to further expand the segment.
In tandem with the acquisition, Ecomate has also proposed a bonus issue involving up to 358.03 million new shares, on the basis of one bonus share for every existing share held. Additionally, the company will issue 358.03 million free warrants on the same basis.
While the exercise price of the warrants has yet to be finalised, Ecomate indicated that full exercise of the warrants could potentially raise RM222 million, which will be utilised to support the group’s working capital requirements.
Ecomate’s shares closed unchanged at RM1.29, giving the group a market capitalisation of RM461.85 million.
-The Edge Malaysia
