TA Research said the acquisition aligns with Ann Joo’s strategy to streamline operations and enhance decision-making processes.
PETALING JAYA: Analysts are positive on the recent developments from Ann Joo Resources Bhd
(Ann Joo) which says it has acquired the remaining 67,500 shares for Konsortia Etiqa Sdn Bhd (KESB) from Datuk Ong Tee Thong.
The share purchase agreement for RM96mil will give Ann Joo full ownership of the KESB, which is primarily involved in the manufacturing of hard-drawn wire, galvanised steel wire, and other wire products.
TA Research said Ann Joo previously had a 55% ownership stake in KESB, but following acquisition, 96% will be owned by Ann Joo Management Services Sdn Bhd and the remaining 4% by Ann Joo Steel Bhd.
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 Malaysia.
KESB owns 436.8 acres of land across six contiguous freehold industrial land parcels along with the buildings and facilities on it located in the Gurun Industrial Park in Kedah.
The land also includes a 275kV main intake substation.
TA Research said the RM96mil price tag for the 45% stake at a market capitalisation of RM213.3mil translates to a price to book value per share multiple of 1.25 times based on a shareholders fund of RM171.2mil as of end-2023.
It noted however, the premium valuation was likely attributable to the land owned by KESB in the Gurun Industrial Park, which had a net book value of RM245.1mil as of end-2023, equating to approximately RM12.88 per sq ft.
TA Research said another positive factor stemming from the acquisition is the influx of large-scale investments to establish new facilities in the 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 with other industrial land, which typically falls within the price range of RM25 to RM40 per sq ft, according to the iProperty website,” the research house said.
As a result, TA Research said it believes the acquisition holds significant potential to unlock the intrinsic value of the 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,” the research house said.
TA Research said it was maintaining its “hold” call on the group with an unchanged target price of RM0.89 based on 12 times its 2025 earnings.
Ann Joo’s shares closed at 83 sen yesterday, giving it a market capitalisation of RM596.7mil.
