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Acoustech buys Johor property development firm for RM15.5 mil

KUALA LUMPUR (Aug 19): Audio equipment manufacturer Acoustech Bhd is buying 100% stake in JM Cemerlang Sdn Bhd, a Johor-based property developer, for RM15.5 million.

In a filing with Bursa Malaysia today, Acoustech said it has entered into a conditional share sale agreement (SSA) with JM Cemerlang’s owner, namely Teo Chai Hock and Lee Boon Leng, for the proposed acquisition.

Acoustech said the acquisition is to strengthen its earnings base and to enhance its growth prospects in the longer term.

“This is also to ensure that the group is not solely dependent on its existing core business of manufacturing speaker units and related products, in view of the challenging business environment and uncertain global consumer market,” Acoustech said.

“The expansion of the group into industrial property development will cushion any adverse effect which the speaker business may experience in the near future,” it added.

Under the SSA, Acoustech is provided with a profit guarantee of RM18.5 million, over four financial years, up to Dec 31, 2019.

The profit guarantee will be derived from a proposed mixed development project, currently undertaken by JM Cemerlang.

Dubbed “Desa 88”, the project involves building 81 units of cluster and detached factories, together with all necessary infrastructure and amenities.

The project will be located on four freehold agriculture lands in Plentong, Johor, which collectively measures 15.3553ha.

Acoustech said JM Cemerlang management has applied to convert the land into industrial use, but the approval is still pending.

Desa 88’s estimated gross development value (GDV) is RM140 million, with an estimated gross development cost of RM100 million.

The purchase consideration of JM Cemerlang will be funded from Acoustech’s internally-generated funds, and the acquisition is expected to be completed by the fourth quarter of 2015.

Although Acoustech said the manufacturing and sale of speaker unit products will remain its main business, it expects its property development business to be its main profit contributor from financial year ending Dec 31, 2016 onwards.

Acoustech appreciated one sen or 1.6% to 63.5 sen today, giving it a market capitalisation of RM105.32 million.

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