- Diversifying its principal business activities for F&B to be key growth driver!

- More rewards in store for shareholders, including forthcoming bonus warrants!

- EAH earnings per share to jump more than two-fold from 0.08 sen to 0.18 sen!

KUALA LUMPUR, Dec 14 (Bernama) -- In a strategic move expected to excite shareholders, the EA Holdings Berhad (“EAH”) Group, under the purview of its Chief Executive Officer Mohammad Sobri Bin Saad, is diversifying to make the sale and distribution of packet foods and beverages products one of its key growth drivers.

In an announcement to Bursa Malaysia this evening, EAH said that it is in the process of acquiring a 90% equity interest in Sunland Volonte Agency Sdn Bhd (“Sunland”) for RM78.75 million through a combination of RM15 million cash, and the issuance of new shares valued at RM63.75 million.

Sunland is principally engaged in the sales and distributions of packet drinks, snacks and related products and renowned throughout Malaysia as the representative of world renowned brands such as Basso, Baronia, SICA or SICA Tomatoes, Loreto, Trucillo, Bonomi, Kronos, and D’Amino.

Sunland’s products grace the shelves of esteemed retail chains and supermarkets such as Giant, Tesco and B.I.G. throughout various states across Malaysia.

These esteemed brands are synonymous with being some of the world’s finest fruit juices, premium biscuits, canned fruits, jams and spreads, olive oil and vinegar as well as pasta, with their origins being in Spain, Italy and Germany.

Basso, in particular, is a “must have” for discerning consumers as this extra virgin olive oil is derived from Italian olives that grow in Puglia, Calabria and Sicily without the use of pesticides and other chemical substances.

The product is strictly controlled by accredited laboratories in order to guarantee the absence of these substances, and enjoyed due to its pleasant and persistent herbal notes coupled with a balanced flavour where bitter and spicy shades are made softer by sweet almond notes.

EAH’s earnings per share to rise substantially with Sunland acquisition

This acquisition by EAH also entails the Vendors undertaking and agreeing to a cumulative profit guarantee of RM14 million for the FYE 2019 and FYE 2020 of Sunland. Accordingly, the profit attributable to EAH will be RM12.6 million or RM6.3 million on an annual basis based on the 90% equity interest held by EAH in Sunland.

For illustration purpose, assuming that the acquisition was completed and with the profit guarantee of RM6.3 million per annum to be attributable to EAH, the earning per share of the Company is expected to increase from the current 0.08 sen to 0.18 sen, based on a minimum scenario assuming that no outstanding Warrants are exercised prior to the acquisition.

In addition, over the past 3 financial years, Sunland had recorded consistent net profits of approximately RM3.15 million, RM3.16 million and RM2.83 million, respectively which translate to net profit margins of approximately 17.5%, 16.9% and 15.8%. Further, during the same period, the net cash flows from operating activities of Sunland were approximately RM2.77 million, RM3.90 million and RM3.26 million, respectively.

Based on the above, the Board is of the view that the acquisition is earnings accretive to the Group and would provide an additional income stream to the Group moving forward.

The latest quarterly report issued by BNM expects growth in services sector in Malaysia specifically in the retail trade, food & beverages and accommodation subsectors mainly supported by domestic consumption and higher tourist arrivals.

Furthermore, the initiatives of the Malaysian Government in boosting the household spending are also witnessed by the change in the relevant laws and policies which include, amongst others, the reduction in Employees Provident Funds which came to effect on 1 March 2016 from 11.0% to 8.0% and the reduction of income tax of 2.0% for low-to-medium income level population as recently announced in the Budget 2018, which both aimed to increase the disposable income of the Malaysian population.

Premised on the above, the Board is optimistic on the future prospects of Sunland under this prevailing market environment and the acquisition is expected to contribute positively to the future earnings of the enlarged Group.

Bonus warrants for shareholders to look forward to!

Apart from the acquisition, EAH will also be undertaking a bonus issue of free warrants on the basis of 5 Warrants for every 16 existing EAH Shares held by its shareholders on the Entitlement Date to be determined later. The free Warrants are issued as a reward for their continuous support to the Group and to allow its existing shareholders to further participate in the future growth of the Company.

“The Board sees the acquisition of Sunland and the bonus issue of warrants as favourable to the Group. In summary, after the completion of the acquisition, EA Holdings Berhad is expected to generate its income from three (3) business segments, namely the ICT business segment and sales and distributions of packet drinks and foods products business segment via its subsidiaries as well as mechanical and electrical engineering services via its associate company,” said Mohammad Sobri.

“With the active diversification exercises that have been undertaken by EAH in recent years, our earnings are poised to improve in the coming years. With the acquisition of Sunland, the Group would be able to mitigate its reliance on the ICT industry and to diversify into new areas and viable businesses as part of a long term strategic plan moving forward,” added Mohammad Sobri. 

EAH Share closed at 4.5 sen yesterday, giving rise to a market capitalisation of approximately RM156.60 million based on the enlarged issued share capital of approximately 3.48 billion EAH Shares. After the completion of its rights issue with warrants exercise which was recently undertaken by the Group, the earning per share of the Company is at 0.08 sen prior to the Sunland acquisition.

As mentioned earlier, the acquisition of Sunland which comes with the profit guarantee is expected to drive EAH’s current earnings per share up from 0.08 sen to 0.18 sen. 

SOURCE: EA HOLDINGS BERHAD
 
FOR MORE INFORMATION, PLEASE CONTACT:
Name : Mr. Kevin Tay
Chief Financial Officer, EA Holdings Berhad
Tel : 03-7733 9762

--BERNAMA