Steel supplier Asia Enterprises Holding is paying $8.86 million to buy a 28.64% stake in privately-held GKE Metal Logistics, so as to build additional earnings sources via a complementary business activity.

 

As at June 30 2024, the book value of the 28.64% stake in GKE Metal Logistics, which provides logistics and inventory management services of non-ferrous metals, was around $4.5 million.

 

To fund the acquisition, Asia Enterprises will issue 28.4 million new shares to the vendor, Li Jing, at 31.2 cents each.

 

At 31.2 cents, it is a premium of some 240% to the volume-weighted average price of 13 cents for each Asia Enterprises share on Dec 30, the last full market day prior to the execution of the sale and purchase agreement.

 

Upon completion of the deal, Li will hold a stake of 7.69% in Asia Enterprises, which has its operating history dating back to 1973.

 

Yvonne Lee Yih Chyi, managing director of Asia Enterprises, controls the company with a total interest of just below 40%.

 

According to Asia Enterprises in its announcement on Jan 5, GKE Metal Logistics, incorporated back in 1984, is a London Metal Exchange-listed warehouse operator in Singapore. 

 

In addition, its subsidiary in China is an approved warehouse operator for the Shanghai Futures Exchange and the Shanghai International Energy Exchange.

 

On Aug 6 2024, Asia Enterprises reported lower earnings for its 1HFY2024 ended June 30 2024, no thanks to lower business volume.

 

The company maintains that its balance sheet remains " sound" as it is debt-free and holds cash and equivalents of 13 cents per share as at June 30 2024, equal to its last traded share price. Taking into account inventory and other assets, Asia Enterprises' net asset value was 28.6 cents.

 

Asia Enterprises Holding A55 -2.34% has reported earnings of $6.1 million for the FY2023 ended Dec 31, 2023, a 62% increase over its earnings of $3.7 million in the previous financial year.

 

The company recorded profit before tax of $7.8 million in FY2023, 42% higher y-o-y, on the back of a 30% y-o-y increase in revenue to $95.4 million, driven by higher sales volumes.

 

The revenue growth came about despite average selling prices generally easing in FY2023 in tandem with a decline in international steel prices. 

 

For 2HFY2023, revenue decreased 23% y-o-y to $32.9 million compared to $42.5 million in 2HFY2022 due to lower sales tonnage and softer average selling prices.  

 

Asia Enterprises&rsquo s gross profit for FY2023 increased 13% y-o-y to $15.4 million, while gross profit for 2HFY2023 increased 8% y-o-y to $6.7 million.

 

Meanwhile, gross profit margin improved to 20.4% in 2HFY2023 and declined to 16.2% for the full-year period.

 

Cash and cash equivalents stood at $41.9 million as at Dec 31, 2023.

 

Asia Enterprises has recommended the payment of a final dividend of 1.0 cent per share for FY2023, representing a payout of 56.2% of FY2023 net profit, compared to the 0.8 cents paid in FY2022.

 

Managing director Yvonne Lee says: &ldquo Notwithstanding the weak macroeconomic environment and downtrend in international steel prices during FY2023, the group delivered our strongest set of financial results over the past decade. This was driven by a general improvement in demand for steel materials from customers in our key marine & offshore segment. In particular, we saw higher steel requirements for new building and repair activities at our customers&rsquo shipyards in Indonesia.

 

Looking ahead to FY2024, the company says it will continue to adopt a cautious business view due to numerous global uncertainties. &ldquo The steel distribution industry in Singapore is expected to continue facing operating cost pressures and a competitive environment. Given the prevailing economic uncertainties and tapering of end-user demand after a robust first half in FY2023, we remain cautious this softer trend could persist into FY2024,&rdquo says Lee.