1. INTRODUCTION
The Board of Directors of the Company is pleased to announce that Ace Gases Sdn Bhd (“AGSB”), a subsidiary of Kelington has on 11 November 2022 committed to investing RM45 million to set up its second carbon dioxide gas recovery plant at Kerteh, Terengganu (“P2”). The P2 will be constructed and installed at the existing Kerteh site (“P1”) to produce beverage grade LCO2 (“Investment”).
The construction of an additional 70,000 tonnes per year of liquid carbon dioxide manufacturing facilities shall commence in December 2022, and barring any unforeseen circumstances, it is expected to be completed by December 2023.
2. INFORMATION OF AGSB
AGSB was incorporated in Malaysia on 20 July 2016 as a private limited liability company and its principal activity is manufacturing, distribution and trading of industrial and specialty gases.
The issued share capital of AGSB is RM25,500,000 comprising 25,500,000 ordinary shares fully paid.
AGSB is a 97.19% owned subsidiary of KGB. The Directors of AGSB are Gan Hung Keng, Ong Weng Leong and Soh Tong Hwa.
3. RATIONALE AND AVANTAGE FOR THE INVESTMENT
The existing plant P1, is currently operating at more than 80% of its capacity and it is the right time to invest in P2 to capture future opportunities. The growth of the industrial gases business is expected to provide Kelington Group with stable recurring income.
4. FINANCIAL EFFECT
4.1 Share Capital and Substantial Shareholders’ Shareholdings
The additional investment to construct the P2 will not have any effect on the issued share capital and substantial shareholders’ shareholdings of the Company as the Investment does not involve issuance of the new ordinary shares in Kelington.
4.2 Net Assets and Earning per share
The investment to construct the P2 is not expected to have any material effect on the net assets and earnings per share of Kelington for the financial year ending 31 December 2022 until the completion of the said construction. Thereafter, the depreciation cost of the new plant is expected to reduce the earnings of Kelington until capacity utilisation is optimised.
However, the Investment is expected to contribute positively to the earnings and net assets per share of Kelington Group for the financial year ending 31 December 2024.
4.3 Gearing
The full utilisation of additional bank loans is expected to increase the gearing of the Group. For illustrative purposes, based on the unaudited consolidated financial statements of the Company for the period ended 30 June 2022, the use of banking facilities is expected to increase the gearing of the Group from 0.64 times to 0.81 times.
5. SOURCE OF FUNDS
The development of the Investment will be funded through a combination of internally generated funds and borrowings.
6. RISK
Other than the normal business risks associated with the construction and operation of the P2, the Company does not anticipate any exceptional risks.
7. INTEREST OF DIRECTORS AND/OR MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM
None of the Directors and/or major shareholders of Kelington and/or persons connected with them have any interest, direct or indirect, in the Investment.
8. STATEMENT BY DIRECTORS
The Board of Directors of Kelington is of the opinion that the additional Investment is reasonable and is in the best interests of the Company.
9. PERCENTAGE RATIO OF THE INVESTMENT
The highest percentage ratio applicable to the acquisition as per paragraph 10.02(g) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad is 23.39%, calculated based on the aggregate original cost of investment compared with the net assets of KGB.
10. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Board of Directors expects the Investment to be completed by 2023.
11. APPROVAL REQUIRED
The Investment is not subject to the approval of the Company’s shareholders or any authorities. The Construction is further subject to all applicable approvals relating to the setting up of a gas manufacturing facility in Malaysia.
This announcement is dated 11 November 2022