HG Metal Manufacturing Limited Announces \$20.8 Million Strategic Acquisition of Tuas Industrial Property

Key Highlights of the Announcement

• Major Asset Acquisition: HG Construction Steel Pte Ltd, a wholly-owned subsidiary of HG Metal Manufacturing Limited, has exercised an option to purchase a prime industrial property at 47 Tuas View Circuit, Singapore, for S\$20.8 million.
• Property Details: The site features a 3-storey ancillary office, two 3-storey production buildings, and two single-storey factories, spread across approximately 24,163.8 sqm. The leasehold tenure runs for 30 years from December 2007. The property will be sold with vacant possession on an “as is where is” basis.
• Valuation & Purchase Price: Independent valuation pegs the property at S\$19 million, but the agreed transaction value is S\$20.8 million, reflecting the inclusion of existing plant and equipment, and strategic value for the Group’s operations.
• Funding Mix: The acquisition will be financed through internal resources, bank borrowings, and net proceeds from recent rights issues and share placements.
• Price Sensitivity: The purchase price is about 15.5% of HG Metal’s current market capitalization, qualifying as a “discloseable transaction” under SGX rules. No shareholder vote is required.
• Impact on Financials: The acquisition is expected to increase gearing from 0.07x to 0.13x and reduce forecasted earnings per share (EPS) from 2.67 cents to 2.13 cents, due to acquisition cost amortization and interest expenses.
• Strategic Rationale: The Group aims to expand its production facilities, storage capacity, and value-added services, addressing capacity constraints at its current site. This positions HG Metal to capture anticipated growth in the Singapore construction sector.
• Conditions & Risks: Completion is subject to regulatory approval from Jurong Town Corporation (JTC), including environmental assessments and possible decontamination work at the vendor’s expense. There is no certainty the deal will close as planned.
• Related Party Disclosure: The vendor (Hai Leck Engineering) is not related to any directors or controlling shareholders of HG Metal.
• Transparency & Inspection: Key transaction documents will be available at the company’s registered office for three months.

Details Investors Should Note

Potential Impact on Share Price

• This acquisition brings a significant increase in asset base and operational capacity, potentially boosting long-term revenue and market competitiveness.
• Short-term, shareholders should expect a dip in EPS and increased gearing, which may be viewed negatively by the market if not offset by future earnings growth.
• The transaction demonstrates management’s confidence in industry growth and business expansion, which could be positively received by investors expecting continued sector momentum.
• There are execution risks: regulatory approvals and environmental requirements must be met, and if the acquisition fails, deposits will be refunded but no compensation for lost opportunities.
• No new directors are being appointed as part of this deal, and no direct or indirect interests exist for current directors or major shareholders, aside from their shareholdings.

Use of Proceeds from Share Placements & Rights Issues

• Out of S\$39.4 million raised in recent equity exercises, S\$1.13 million has been earmarked for this acquisition (option money and deposit), with substantial further capacity to fund future growth and working capital needs.
• The allocation aligns with previous shareholder communications and capital raising plans, maintaining transparency in fund usage.

Strategic Rationale and Future Outlook

The acquisition is a cornerstone of HG Metal’s strategy to scale up production, improve service delivery, and strengthen its competitive position in Singapore’s construction sector. With current facilities nearing full capacity, the new site offers vital room for expansion, supporting future growth and additional services without major capital outlay for new equipment.

The timing aligns with market expectations of continued robust demand in construction, and management sees this as a critical move to secure its leadership and meet increasing customer requirements.

Risks and Uncertainties

• Completion depends on regulatory approvals and environmental clearance; failure could delay or derail the transaction.
• Shareholders are advised to monitor updates, as any change in deal status could be price sensitive.
• Potential investors should consider the short-term financial impact versus longer-term strategic benefits.

Disclaimer

This article is intended for informational purposes only and does not constitute investment advice. The completion of the property acquisition is subject to regulatory approvals and other conditions. Investors are advised to exercise caution and consult their financial, legal, tax, or other professional advisors before making any investment decisions. The company will provide updates on any material developments related to this transaction.

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