Malaysian Pacific Industries Bhds (MPI) proposed internal reorganisation exercise, which involves the merging of Carsem (M) Sdn Bhd (CM) and Carsem Semiconductor Sdn Bhd (CS), is seen as an attempt to improve the groups economies of scale and operational flexibility.
It's a positive move.
Cost savings are expected to arise from eliminating the duplication of resources, such as human resources and marketing, said TA Securities head of research C.K Ngu.
CM and CS are both involved in the business of assembly and testing.
Analysts said the merger would reap benefits such as easier business promotion under one trade name and achieving greater efficiencies in operations and tax.
Some analysts expect income enhancement from lower taxes on the assumption that CS products would benefit from CMs 10-year tax-free status for certain products.
CM is currently two years into its tax-free status. CS pioneer status will expire next month.
The proposed rationalisation will promote greater tax efficiency at CM, which will enjoy another eight years of tax-free income for selected products, said online financial portal, Surf88.com.
However, other analysts do not share this view. They believe the management is in the process of applying for an extension of CS pioneer status.
MPI managing director David Edward Comley declined to comment when contacted by StarBiz yesterday.
Under the proposal announced last Friday, CM would buy the entire stake in CS from two shareholders 70% from MPI, and 30% from Permodalan Nasional Bhd (PNB) for RM180mil cash. MPI will receive RM126mil, and PNB RM54mil.
In addition, MPI will also receive cash dividends of RM140mil, and PNB RM60mil. CS declared the dividends on March 13.
CMs major shareholders are MPI, with 70% stake, and Amanah Saham Bumiputra (ASB), with 30%. After the acquisitions, CS will become a wholly-owned subsidiary of CM.
The proposed scheme also involves a renounceable rights issue of 60 million new shares at RM1 per share, and 32,000 new redeemable preference shares of RM100 par value each at an issue price of RM10,000 per CM share to MPI, PNB and ASB.
The rights issue is expected to raise RM380mil for CM.
MPI will announce tomorrow its financial results for the third quarter ended March 31.
Analysts in general expect to see a slight improvement in earnings compared with a year ago due to a maiden contribution from one of its clients, US-based Analog Devices.
MPI managed to clinch a deal with Analog Devices, which has decided to shut down its production facilities in Asia. Analog has outsourced its packaging volume to MPI.
There will not be much upside surprise, given that first quarter of the year is normally a slow season for the semiconductor industry. Furthermore, there is still great pressure on pricing and end-demand remains soft, said an analyst.
MPI posted a net profit of RM629,000 for the second quarter ended Dec 31, 2002. The chipmakers half-year profit rose to RM7.6mil, compared with a net loss of RM28.2mil in the period a year ago.
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