Central Global to acquire remaining 30% stake in Sabah construction firm via share issuance

• RYRT International has an order book of RM229.22 million as at May 31, 2023, which will potentially translate into profits and operating cash flows for the company.

KUALA LUMPUR (July 11): Manufacturing and construction firm Central Global Bhd (CGB) has proposed to acquire the remaining 30% stake in RYRT International Sdn Bhd for RM13.26 million, via the issuance of shares in the group at RM1.30 per share.

The group, via wholly-owned subsidiary CIC Construction Sdn Bhd, had bought the initial 70% stake in RYRT International, a Kota Kinabalu-based construction player in January 2022 for RM30.1 million, via the issuance of CGB shares at RM1.04 per share.

In a filing to Bursa Malaysia on Monday (July 10), CGB said it has signed a supplemental sale and purchase agreement (SPA) with RYRT Holdings Sdn Bhd, Lee Chee Vui and Soo Yu Chai, to acquire the remaining 30% stake.

Under the supplemental SPA, the profit guarantee period will be extended from Sept 1, 2021 to Dec 31, 2024.

The guarantors also have agreed to guarantee 100% of a higher profit guarantee amount of RM50 million, and if there is a profit shortfall, they will compensate CIC Construction in cash equivalent to 100% of the profit shortfall.

Central Global said it is of the view that RYRT International is expected to achieve the revised profit guarantee amount after taking into consideration that the firm had achieved an aggregate profit after tax of RM17.24 million for the 18-month period from Sept 1, 2021 to Feb 28, 2023.

Under the initial SPA signed in January 2022, an aggregate audited profit after tax of RM43.0 million was guaranteed for the financial year ending Aug 31, 2022 (FY2022) and FY2023.

RYRT International has an order book of RM229.22 million as at May 31, 2023, which will potentially translate into profits and operating cash flows for the company. The estimated completion timeline for the construction of the Lahad Datu Phase 1 (upgrading of water supply infrastructure in Sabah) project is by December 2023, while the estimated completion timeline for the Jalan Semawang to Tanjung Kuala Gum-Gum (road construction) project in Sandakan, Sabah is by October 2025.