This small cap seems to have attracted investor attention --- so here's my small contribution by posting the Company's text from a circular to shareholders. Read the text slowly and carefully -- there are answers to the key questions you may have regarding the Disposals of the stakes in Thai assocs.
KTIS is in the midst of a restructuring exercise with the view to a public listing of its shares on SET. In this regard, KTIS intends to restructure such that EPPCO and EPC will both become its wholly owned subsidiaries. To this end, it is KTISâ intention to acquire all the shares in EPPCO and EPC from the existing shareholders of EPPCO and EPC, which include the Company and King Wan Industries. KTIS hopes to derive synergy among the restructured group of companies as these companies each constitute a part of the bigger production chain and share certain raw materials, utilities and expertise involved in the overall operations.
The Companyâs decision to divest its stake and King Wan Industriesâ stake in EPPCO and EPC respectively is consistent with its commitment to optimize profitability and operations. The Proposed Disposals would enable the Company and King Wan Industries to divest its respective stakes in EPPCO and EPC at an attractive premium and allows the Company and King Wan Industries to redirect funds into other strategic opportunities. The Company and King Wan Industries will monitor the price of the Consideration Shares and the Consideration Shares will be progressively sold off as and when market prices are favourable.
The Directors are of the view that after Completion of the Proposed Disposals, the existing businesses of the Group, namely, mechanical and electrical engineering services, property, manufacturing and services, will not be significantly affected as the existing businesses of EPPCO and EPC are different from the existing businesses of the Group.
The Group has benefited from the distribution of dividends declared and paid from EPPCO and EPC. Upon completion of the Proposed Disposals, the Group will cease to receive dividends from EPPCO and EPC. In lieu of dividends, the Group will receive KTIS Shares listed on the SET. The KTIS Shares will not be subject to any moratorium or sale restriction. Hence, the Company and King Wan Industries will be free to decide on its investment strategy with respect to the Consideration Shares on either to hold or to sell the Consideration Shares to the benefit of the Company and King Wan Industries respectively. For the period FY2010 to FY2012, the Group had received S$14.2 million and S$1.7 million in dividends from EPPCO and EPC respectively.
5.2 Use of Proceeds
The Directors are currently reviewing and assessing the Groupâs plans and projections and subject to the relevant approvals, the net proceeds from the sale may be applied towards funding the expansion of the Groupâs businesses, to pursue new investment
opportunities or for working capital purposes. Until such time that the net proceeds have been fully disbursed, the Company will make periodic announcements as and when material amounts from the net proceeds are disbursed.
The Company does have the intention to distribute some of the excess cash back to its Shareholders. Proceeds from the Proposed Disposals may not result in an immediate increase in cash inflows. Instead, the Consideration Shares would be progressively sold off by the Company and King Wan Industries when market prices are favourable.