Mamee-Double Decker’s entry into beleaguered KHEE SAN BHD has ignited investor interest in the latter.
Since the announcement by Khee San on Monday that it has proposed a special placement of 94 million shares to Mamee, the former’s share price has shot up by 36% to 48.5 sen.
Mamee, though, will have its work cut out to create value in Khee San.
Some may view the entry of Mamee as akin to a relisting of the group, which was privatised back in January 2012.
While this may be part of the longer term plan, there is no indication that this is happening for now.
What Khee San shareholders need to be aware of is that aside from Mamee forking out some RM23.5mil to buy new shares in Khee San, there is a plan to conduct a rights issue to raise RM37.5mil more from shareholders.
In total, a whopping RM61mil is expected to be going into Khee San, to reduce its debts and help its business grow.
Khee San manufactures wafer and candy products, with prominent brand names being Fruit Plus and Torrone barley mint candy.
The 94 million shares to be placed out to Mamee, representing a 45.11% equity in Khee San, has been fixed at price of 25 sen per share.
Following the completion of the placement, Mamee will emerge as a controlling shareholder of Khee San.
As such, Mamee is obliged to extend a mandatory take-over offer for the remaining shares in Khee San that is not held by them.
According to a filing with Bursa Malaysia, Mamee intends to maintain Khee San’s listing status.
Meanwhile, the proposed rights issue entails the issuance of 208.4 million rights shares on the basis of one rights share for every one existing Khee San share held on the entitlement date after the completion of Mamee’s share subscription.
Since Mamee’s announcement of its proposed entry into Khee San, LONDON BISCUITS BHD has ceased to be a substantial shareholder of Khee San.
Confectionery manufacturer London Biscuits, which has been beset with troubles early this year and is now a Practice Note 17 (PN17) company, disposed of its entire stake of 20.8 million shares in Khee San in the open market last Friday.
It was previously the single largest shareholder in Khee San at 20% equity.
Recall that London Biscuits had been issued a qualified opinion by its external auditors and defaulted on a RM9.83mil loan.
Khee San, which made a net loss of RM44.65mil for the third quarter of the financial year ending Dec 31,2019, has defaulted on a RM14.62mil loan provided by the Bank of China, along with interest to be paid.
Apart from that, there are debts to be settled.
As of Sept 30,2019, Khee San has outstanding debts owing to creditors and banks or financial institutions amounting to RM47.1mil and RM78.4mil, respectively.
The company is currently in a negative cash position of RM7.3mil.
Khee San’s total net book value of its properties amount to RM34.36mil, as at Dec 31,2018.Prior to Mamee’s proposed take over of Khee San, the latter had in September, attempted to purchase the distribution business of Wah Kong Corp Sdn Bhd, which came with a net profit guarantee of RM6mil.
Wah Kong Corp sells, markets and distributes fast moving consumer goods such as confectionery, healthcare, cereal, beverage and pet food products.
The purchase consideration for the deal was to be satisfied through new Khee San shares at an indicative issue price of 33 sen per share.
However, the deal fell through as it lapsed upon expiry of the further extension of the heads of agreement signed by both parties, citing a “pending consent from the creditor banks and certain other creditors”.
Now that London Biscuits has made way for Mamee, investor sentiment around Khee San appears to have improved.
Mamee has a good name in the market.
The Melaka-based company, founded in 1971 and eventually incorporated in 1991, is famous for its home-grown brand of Mamee Monster instant noodle snack, which bears the iconic blue monster as its mascot.
The instant noodle and snack manufacturer was previously listed on the main board of Bursa Securities in 1992, but was later taken private in 2012 by its owners and founders – the Pang family.
The RM179.8mil transaction represented an estimated price-earnings multiple of 12 times.A year after that, a minority 30% stake was sold to Hong Kong-based private equity firm Headland Capital Partners Ltd for an undisclosed sum.
In the Bursa Malaysia filing, Khee San said Mamee’s potential entry as the controlling shareholder is expected to derive strategic benefits.
This is on the back of the established food and beverage brands that both companies own, that cater to various market segments.
“As such, Khee San and Mamee may potentially leverage on each other’s extensive network of suppliers, distributors and customers to market their respective products, thereby increasing their market presence, ” the filing reads.
Mamee group co-founders are a father and son duo Datuk Pang Chin Hin and his son Tan Sri Pang Tee Chew who is group CEO. They are a seasoned hand in the industry.
Mamee manufactured its first product in 1972, Lucky instant noodle and vermicelli.
Interestingly, the idea for Mamee Monster noodle snack was ignited when Pang observed rubber tappers eating uncooked instant noodles straight from the pack.
Since then, Mamee Monster became a household name, and a brand name that has withstood the test of time.
Over the years, the company continued to churn out other products, such as Double Decker’s crackers, Mister Potato chips, Nutrigen cultured milk and yoghurt products, and Mamee Chef instant noodles.
Mamee exports its products across 100 countries.
The company believes in investing heavily on its branding initiatives and strives to offer consumers quality and great value at competitive prices, even during a downturn in market conditions.
In a previous interview in 2016, Tee Chew had highlighted that the company was working on widening Mamee’s distribution to improve on its product availability.
The sustainability of a brand relies on a company’s innovative initiatives and its ability to adapt to the market’s needs.
Mamee is not a company that rests on its laurels, and this can be observed through its product innovations and marketing strategies.
For one, Mamee takes cognisance of the evolving needs of consumers.
Consumers today spend time reading details on food packaging.
Particularly, when it comes to snacks, consumers tend to gravitate towards healthier snacks.
Banking on the healthy snacking trend, Mamee launched Monster Biskidz in 2016, which are wheat biscuits containing DHA -- an omega-3 fatty acid.
The following year, Mamee began production of its purple sweet potato crisps under the Mister Potato brand.
Its Mamee Monster noodle snack also boasts cholesterol free, low trans fatty acid, high protein and natural carotene.
Besides that, Mamee showcases its creativity in marketing, as seen in the recent campaign which introduced a limited edition flavour of its Mamee Monster noodle snack to the market.
A number of special edition jumbo packs of Mamee Monster contained a mystery packet of an extremely spicy version of the noodle snack.
Prior to that, Mamee rolled out a limited edition version of its Daebak Noodles -- Ghost Pepper Spicy Chicken cup noodles, infused with the infamous ghost pepper chilli, which charts 1,000,000 on the Scoville scale for spiciness.
These limited edition snacks had its advertising done on its own, as netizens shared their experience across social media channels.
It will certainly be exciting to see what Mamee intends to do with Khee San, should the share subscription and rights issue proposals come to fruition.
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