Part III of the Octagon Series: .
Almost a year later, Feb 2005, OCTAGON CONSOLIDATED BERHAD ("OCTAGON" OR THE "COMPANY")
- Thursday February 3, 2005
Octagon expands coating business
OCTAGON Consolidated Bhd is expanding its coating business and further increasing its participation in the manufacturing and trading of customised industrial paints, inks and chemical products with acquisition and subscription of shares.
The company, through wholly-owned subsidiary Profound Peak Sdn Bhd, proposed to acquire the entire interests in Premierpath Sdn Bhd for RM19mil.
Another wholly-owned subsidiary, Octagon Industrial Coatings Technology Sdn Bhd, proposed to subscribe for 75,000 new shares or 30% of the enlarged issued and fully paid up capital of Advanced Coatings and Surface Technologies Sdn Bhd (ACST), for RM75,000.
The acquisition and share subscription to be satisfied wholly in cash would be funded by internally generated funds and/or borrowings, Octagan said in a statement yesterday.
It said that the proposals are also expected to enhance the group's future earnings and provide it with stable cashflow generating businesses.
Premierpath and its subsidiary, Premierpath (KL) Sdn Bhd, are involved in the manufacturing and trading of paints, thinners and printing materials.
It said that Premierpath reported audited consolidated net tangible assets of RM5.8mil and profit after tax of RM1.67mil for the year ended Dec 31, 2004.
It said that the vendors of Premierpath, Yeap Hup Suan, Yeap Siew Kian, Yap Kim Wan @ Yap Mah and Low Kim Leng, had provided a profit guarantee for Premierpath for three financial years.
Under the profit guarantee, Premierpath and its subsidiary are expected to record profit after tax of not less than RM2.67mil for the year ending Dec 31, 2005, RM3.2mil in 2006, and RM3.71mil in 2007.
ACST, which is principally involved as a supplier, dealer and contractor for high performance coatings, has been successfully registered as an authorised dealer of paint and industrial chemicals to Petroliam Nasional Bhd (Petronas) and all its subsidiaries in the upstream sector and registered with the Finance Ministry as a supplier of, inter alia, paint and industrial chemicals.
For the period ended June 30, 2004 it registered loss after tax of RM70,000 and a net tangible asset of RM30,000. – Bernama
19 Million for a company that just registered a loss after tax of rm70,000 and a nta of rm 30,000.
Why?
Oh why?
Hey I do love this song so much. :D (ps: Still want to HOLD this stock? Are you sure? )On 19th Feb 2005, Octagon managment speaks to the Edge Weekly on their failed Indian project! Yes, they had decided NOT to proceed with their plans.
- Corporate: India still in Octagon's sights
By Lim Ai Leen
Octagon Consolidated Bhd's plans of becoming an independent power producer in India have come to a halt. But the management is still keeping an eye open for other power opportunities there.
In February 2004, the company announced that it was buying two power producers in India — Kasargod Power Corp Ltd (KPC) in Kerala and RVK Energy Private Ltd (RVK) in Andhra Pradesh — for RM50 million. Last month, it terminated the share sale agreements for both buys, citing the sellers' inability to meet conditions precedent to the agreements.
Executive director Siti Fatimah Mohd Shariff explains that these conditions are commercial in nature and include uncollected claims made by the vendor to Kerala state, and the vendor's inability to get the gas company's approval for the assignment of the fuel supply agreement. She says: "We have extended the deadline twice. We have given them ample time to meet the conditions precedent. They have not met the conditions and we don't want to extend anymore."
Chief executive officer Mazlan Ali adds that the deals also fell through because of changes to the tariff structure last April. He elaborates: "…after we signed our agreement, there were new charges — the transmission or wheeling charges went up from 8% to 28% per kilowatt hour… They also increased the cross-subsidy surcharge on transmission and distribution charges. And electricity duty went up from six paisa to 25 paisa per kWh," he says. Mazlan observes that the hike was due to the free electricity that needed to be given to farmers.
These changes, says Mazlan, make the financials uncertain. KPC signed its power purchase agreement with the Kerala State Electricity Board in 1995, and has 13 years left on the contract. It continues to pay the 8% wheeling charges under the old tariff regime but it's not clear for how much longer. He says the general view among Indian power players is that the new 28% charge will wipe out the industry. "It doesn't make commercial sense. But to wait for them to come up with the new tariff is too long," he says.
"If you reflect the new tariff order in the profit and loss, it becomes a negative… And with the conditions precedent not being met, it actually changes the risk profile of the business," Mazlan surmises.
While Octagon's management stresses that this setback has no financial impact on the company, it does disappoint those who were looking for a bottom-line boost beginning this year. The deals came with net profit guarantees of RM11.53 million, RM11.79 million and RM10.19 million for the financial years ending March 31, 2005 to 2007, respectively.
On average, Octagon's mainstay industrial paints and coatings business has been earning a healthy RM11.3 million a year in net profits over the last three years. But growth has been pretty flat, hence the diversification into power generation. Half of the company's RM40 million cash pile was supposed to be pumped into the Indian power project......
So Octagon had a healthy business but it was flat. No more growth. Having a healthy cash pile was not enough. They want to diversify! This is the bottom line yes?
Now India plan is halted. So they had earlier spend 19 million on a loss making coating business. And then on 9th April 2005, they announced their venture into tyre recycle plant!
- Saturday April 9, 2005
Octagon to invest RM100m in recycle plant
BY SHILING WOON
OCTAGON Consolidated Bhd will construct a waste tyre pyrolysis plant, estimated to cost RM100mil, to recycle waste tyres into commercially marketable products.
The plant is to be set up under Advance Pyrotech Sdn Bhd (AP), a joint venture between Octagon and K.K. Incinerator Engineering and Construction (M) Sdn Bhd (KKM).
Managing director and chief executive officer Mazlan Ali said the plant, which could process 120 tonnes a day, was expected to be completed in the fourth quarter of 2006.
The plant would be located either in Pahang or Selangor to facilitate tyre collection.
It would recycle waste tyres into products such as high-quality carbon black, recover oil and steel wire chips by utilising South Korean pyrolysis technology, he told a press conference in Kuala Lumpur yesterday.
The joint venture agreement (JVA) was signed on Thursday.
“The JVA is a step in the right direction for Octagon, as it is synergistic with our renewable energy project in Malacca.
“Both projects are environmentally-friendly solutions for today's waste management problems,” Mazlan said.
Project director Jonathan Lee said the plant would help overcome the serious environmental issues posed by waste tyres in Malaysia.
The illegal dumping of tyres could pose a variety of health risks, including become breeding ground for dengue-carrying mosquitoes, he said.
Come Dec 2005.
Numbers still look ok, except for the cash. And yes, trade receivables are increasing so ever higher. (It is ok that the cash decreased because the company already said it made that 19m acquisition of Premierpath )
And yeah, if one was still an investor, one would have subscribed to the rights issue on Nov 2005. OCTAGON CONSOLIDATED BERHAD ("OCTAGON" OR "COMPANY") RIGHTS ISSUE OF 65,967,899 WARRANTS AT AN ISSUE PRICE OF RM0.05 PER WARRANT ON THE BASIS OF 2 WARRANTS FOR EVERY 5 EXISTING ORDINARY SHARES OF RM0.50 EACH HELD IN OCTAGON ("RIGHTS ISSUE OF WARRANTS")
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