PETALING JAYA: Analysts are positive on the recent developments from Ann Joo Resources Bhd, which recently said it acquired the remaining 67,500 shares in Konsortia Etiqa Sdn Bhd (KESB) from Datuk Ong Tee Thong.
The share purchase agreement for RM96mil will give Ann Joo full ownership of KESB, which is primarily involved in the manufacturing of hard-drawn wires, galvanised steel wires, and other wire products.
TA Securities Holdings Bhd said KESB previously had a 55% ownership stake by Ann Joo, but post acquisition, 96% will be owned by Ann Joo Management Services Sdn Bhd and the remaining 4% by Ann Joo Steel Bhd.
In its report, the research house said the acquisition aligns with Ann Joo’s strategy to streamline operations and enhance decision-making processes.
It added this will also enable the group to capitalise on growth opportunities in the industrialisation of Northern Malaysia.
KESB owns approximately 436.8 acres of land across six contiguous freehold industrial land parcels, along with the buildings and facilities on it.
The land also includes a 275kV main intake substation, located in Gurun Industrial Park, Kedah.
TA Securities said the RM96mil price tag for the 45% stake at a market capitalisation of RM213.3mil translates to a price of book value per share (P/Bk) multiple of 1.25 times based on a shareholders fund of RM171.2mil as of end-2023.
It noted however, the premium valuation is likely to be attributed to the land parcels owned by KESB in the Gurun Industrial Park, which had a net book value of RM245.1mil as of the end of 2023, equating to approximately RM12.88 per square feet.
TA Securities said another positive factor stemming from the acquisition is the influx of large-scale investments to establish new facilities in Gurun Industrial Park, particularly from leading players in the semiconductors, electrical and electronics, and automotive sectors.
“In our view, this land is relatively undervalued, especially when compared to other industrial land, which typically falls within the price range of RM25 to RM40 per square feet, according to iProperty website,” the research house said.
As a result of this, TA Securities said it believes the acquisition holds significant potential to unlock the intrinsic value of these assets.
It said on a pro forma basis, the group’s gearing ratio is expected to improve marginally from 1.21 times to 1.13 times, while net assets are projected to increase from RM1.2bil to RM1.3bil, translating to a rise in net assets per share from RM2.14 to RM2.29.
“This could lead to better asset utilisation, improved profitability, and higher returns on equity, all of which align with Ann Joo’s long-term strategy of diversifying into property development and industrial property investments,” it said.
In line with that, the research house said it will maintain its hold call on the group with an unchanged target price of RM0.89 based on 12 times its CY25 earnings.
At time of writing, Ann Joo’s share price was 82 sen, giving it a market capitalisation of RM585.9mil.