Mikro on acquisition spree, boost bottomline and share price

Mikro MSC Bhd appears to be on the upward trend after it touched a year high of 30 sen on Aug 13. On a year to date basis, the counter rose some 26% , coming from a low of 18 sen in January this year.

The heightened interest in Mikro MSC was buoyed by news of it proposing to buy a Singapore-based company. On August 12, Mikro MSC said it plans to acquire TES Productions & Projects Pte Ltd, which specialises in manufacturing signs and advertising displays, for RM30 million in shares.

A heads of agreement was signed with Calida Group Pte Ltd to acquire the entire stake in TES. Lim Seng Gee is the sole director of TES and Calida, as well as the sole shareholder of Calida, which currently owns the entire stake in TES.

The stake acquisition will be paid through the issuance of 134.83 million new shares in Mikro at an issue price of 22.25 sen apiece. This price reflects a 9.99% discount compared to the five-day volume-weighted average of Mikro shares of 24.72 sen last Friday.

Mikro also proposed to diversify its existing businesses to include design, manufacture and installation of signs and advertising displays, as well as provide interior fit-out services. TES is expected to contribute more than 25% of the company's net profit, and may result in a shift of more than 25% of net assets.

Mikro MSC designs and manufactures electronic products for the power distribution industry. The company has also diversified into the business of the manufacturing and trading of biomass fuel products. If successful, the company said it will be able to tap TES’ existing client bases. The proposed acquisition will introduce Mikro to a new customer base, and effectively expand its presence in Singapore.

Calida is providing guarantee on a joint and several basis to the company that the audited net profit after tax of TES for the financial year ending Dec 31, 2024 (FY2024) would be at least S$800,000 (RM2.68 million).

The audited net profit after tax of TES for FY2025 would be above S$890,000. Mikro MSC has been enjoying sterling results this financial year. Its net profit jumped more than 15 times to RM29.62 million in the nine months ended March 31, 2024 from RM1.91 million a year ago.

Its splendid results were boosted by the share of results of an associate and higher other operating income. Revenue also increased to RM39.94 million for 9MFY2024, from RM38.75 million a year ago.

Investors are banking on Mikro MSC’s expansion and diversification efforts, which will put the company on a firmer footing. If all goes accordingly, the only way is up for Mikro MSC.