MARC has placed its AID /MARC-2ID  ratings on Emas Kiara Industries Bhd’s (EKIB)  RM80 million Partially Underwritten Murabahah Notes Issuance Facility / Islamic Medium Term Notes Issuance Facility (MUNIF/IMTN) on MARCWatch Developing. The action follows EKIB’s announcement on November 27, 2007 that the Company had entered into a conditional sale and purchase agreement to acquire 51% in Carimin Sdn Bhd (CSB). The acquisition of CSB will allow EKIB to expand into the oil and gas related business.

EKIB proposes to acquire the 51% stake in CSB for about RM25.5 million in shares. EKIB will issue 51,000,000 new ordinary shares of RM0.50 each at an issue price of RM0.50 per share to CSB’s shareholders. CSB and EKIB have common major shareholders and directors, Tan Sri Dato’ Kamaruzzaman bin Shariff and Datuk Yahya bin Ya’cob. PM Securities Sdn Bhd has been appointed as the independent adviser to advise the minority shareholders on the related party transaction.
 
CSB is principally involved in manpower supply, structural fabrication and construction work in the oil, gas and petrochemical industry. The company has a reasonably sound financial profile and earnings visibility. The acquisition is conditional on CSB securing the renewal of its Services and Supplies Licence with Petroliam Nasional Berhad (Petronas), and the retention of key personnel for a period of three years.

EKIB is the leading geosynthetic manufacturer in Malaysia with an estimated 60% market share. The Group produces a diverse range of geosynthetic products and provides total solutions including engineering design, manufacture and installation. EKIB has diversified into industrial fabrics to increase its recurring income source and to mitigate demand cyclicality in the geosynthetic sector. EKIB exports its products to Australia, South East Asia, the Middle East and Africa.

EKIB recorded unaudited revenue of RM74.9 million and net profit of RM2.9 million for the nine months ended 30 September 2007 whilst CSB’s unaudited full year results reflected RM90.4 million of revenue and net profit of RM7.4 million for the financial year ended 30 June 2007. CSB is expected to record a better performance in FY2008 on the back of RM280 million worth of contracts in hand. MARC is of the opinion that should the acquisition go ahead, it will facilitate improved earnings diversity for EKIB and will positively impact EKIB’s credit profile. MARC will monitor the progress of the proposed acquisition and resolve the MARCWatch placement once the transaction closes.