Petronas Chemicals Group BHD (PetChem) acquirement of Dutch organization Da Vinci Group BV offers its direct entry into silicon business. Also, it will allow the PetChem to command more stable and higher profit margins.
For funding, the scheme is likely to be completely sponsored through internally generate reserves given the company’s balance sheet.
However, Maybank IB research mentions that outright acquisition is also a better way to gain entry into an expert field. It may include specialty chemicals.
“This tactical move will enable PetChem to have an instant entry into the mounting silicon business. However, it has a wide range of applications in our day-to-day lives. Specialty chemicals have huge command over profit margins.” according to the report of the research firm.
On Thursday, PetChem came into the sale & purchase deal to gain 100% of the Da Vinci group for around RM760.8mil cash. However, Netherlands Da Vinci has a huge range of business, comprising specialty chemicals.
The acquirement, as per the MIDF research will gain PetChem’s competitive reach in the Asia-Pacific market. This market hosts the number of businesses.
“It made a huge influence on the firm’s earnings from the excess supply of chemicals. It is because of the fresh operational crackers in the Middle East, “said, the research firm.
With its cash position, which gains at RM10.3bil as of 2018. However, MIDF estimates that PetChem is likely to deposit the acquisition through internal funds.
Also, the time venture is funding, the research firm said it will have a less impact on the company’s ratio. It would rise to around 0.1 times from around 0.06 times post-acquisition.
However, AmInvestment Bank claims that the PetChem’s massive asset base of RM37bil. The firm does not suppose any substantial impact on net book value or its earnings from the venture.
The acquisition cost, the research house state it dominating for 1% of market assets. And around 7% of its net cash position around RM10.3bil.