LFE to undertake private placement to fund construction firm buy

• CPMSB has contributed substantially to the group’s revenue for the financial year ended Dec 31, 2021, but the group was only able to recognise profit after tax from CPMSB up to the extent of its equity interest in the firm, despite the recognition of 100% of the firm’s revenue.

KUALA LUMPUR (Dec 9): LFE Corp Bhd has proposed to undertake a private placement to partially fund the acquisition of the remaining 49% stake in its 51%-owned construction firm Cosmo Property Management Sdn Bhd (CPMSB).

The private placement entails the issuance of 240.41 million new shares — 30% of LFE's total issued shares — to raise RM20.77 million based on an issue price of 8.64 sen apiece, the group said in a bourse filing.

LHE said it would use RM20.45 million of the private placement’s proceeds for the partial settlement of the RM29.4 million price of acquiring the CPMSB stake.

Another RM2.45 million of the purchase consideration is to be funded via internally-generated funds, and a further RM6.5 million via a separate issuance of 66.87 million new shares at 9.72 sen apiece.

LFE said CPMSB provides civil and structural works, and mechanical and electrical works, in the construction industry, which it noted was similar to the group’s current core business activities.

CPMSB, it added, has contributed substantially to the group’s revenue for the financial year ended Dec 31, 2021, but the group was only able to recognise profit after tax from CPMSB up to the extent of its equity interest in the firm, despite the recognition of 100% of the firm’s revenue.

“As such, the acquisition of additional equity interest in CPMSB is expected to allow the group to recognise the entire profit after tax from CPMSB, translating into a more reflective margin result of the group according to its controlling interest in CPMSB,” said LFE.

“Furthermore, the proposed acquisition represents a lower-risk investment for the group compared to an investment in a new business or external company, as CPMSB is already an ongoing entity generating its own cash flow and profits as well as an existing subsidiary of the group that does not require additional costs for integration into the group from an operational or administrative perspective,” the group added.

LFE said it has entered into share subscription agreements with five investors for the full placement of the 240.41 million shares under the private placement exercise.

Lakeview Holdings Sdn Bhd, Quah Siang Huat and Ong Khye Siang are each to subscribe for 51.5 million or 21.4% of the placement shares, while LSA Harmony Sdn Bhd and Tong Hock Seng will subscribe for 43.91 million (18.3%) and 42 million (17.5%)of the placement shares respectively.

“The issue price of 8.64 sen per placement share under the subscription agreements was arrived at between LFE and the identified investors on a willing-buyer willing-seller basis, and after taking into consideration a discount of not more than 20% to the five-day volume weighted average market price of LFE shares up to Dec 7, of 10.8 sen,” LFE added.