SET-listed Aapico Hitech Plc (AH) is more upbeat about its future prospects after acquiring a 25.1% stake in Indian auto parts maker Sakthi Global Auto Holdings (SGAH) for US$100 million (3.5 billion baht).
Yeap Swee Chuan (left)
Aapico signed the acquisition deal with SGAH on Thursday.
Under the deal, Aapico will spend $50 million of the total to buy 2,510 newly issued ordinary shares, equivalent to 25.1% of SGAH. The other $50 million will be a synthetic convertible loan to SGAH with an interest rate of 20%.
But SGAH must complete an internal group restructuring before the investment is finalised by the end of the second quarter.
Aapico expects the deal to strengthen the company as it seeks to become a global auto parts maker, introducing a new customer base and international distribution channels, delivering stable and sustainable growth and diversifying operating risk.
The deal is also intended to create a strong business partnership through which synergies can be achieved in such areas as technical expertise and product variety, helping Aapico to expand into India, Portugal, the US and China, while introducing SGAH's products to Japanese OEMs (original equipment manufacturers).
Aapico sees the transaction enhancing earnings performance and extending the company's global reach.
Aapico will obtain funds from internal cash flow in the amount of $25 million and credit facilities from financial institutions (TMB Bank and Bangkok Bank) in the amount of $75 million with a maturity of five years, at an average interest rate not exceeding the minimum lending rate minus 2.30%.
President and chief executive Yeap Swee Chuan said the latest deal would help Aapico become one of Asia's leading automotive companies by 2020 with annual revenue of 30 billion baht and a net profit margin of 10%.
"Global automotive output was nearly 100 million vehicles in 2016, but Aapico's footprint covered only 3% of total production, so the company aims to access more to grow the business in a long run," Mr Yeap said.
In a related development, Aapico reported first-quarter revenue growth of 0.95% to 3.95 billion baht, while net profit rose 46% to 228 million baht.
Net profit margin improved to 5.8% in the first quarter from 3.8% a year earlier, due to lower operating costs.
Aapico had a debt-to-equity ratio of 0.71 in the first quarter. The ratio is expected to rise to 0.9-1 after the latest acquisition.
Mr Yeap expects Aapico's revenue to grow by 5% this year to 16 billion baht.
Founded in 1996, Aapico has 29 subsidiaries and nine associates in Thailand, Malaysia and China.
AH shares closed Friday on the Stock Exchange of Thailand at 21.80 baht, up 1.70 baht, in trade worth 75 million baht.