AT SYSTEMATIZATION BHD KLSE: AT (0072) ACE : Industrial Products
it doesnt mean that the credit line is gone, is it? 14m working capital doesnt mean it cannot be spent to buy a factory?
the funds to purchase is available (not why would they want to pull through with this without doing any financial feasibility study)
point 1-2, yes, i concede, its pure speculations. your point from 3-5 can be invalid without any concrete evidence. point 6-8 is a matter of your opinion, unsubstantiated as much as AT claims.
i guess on paper, AT does have the financial capabilities to acquire this factory. speculative counter it maybe, but so is Adventa (no glove exposure?), K1 (cotton buds up our nostril and down our throat) and many more. certainly aint fundamentally sound i would say. Thats why its 0.11?
i guess as much as that no one knows if the timelines AT claims or the ones youve mentioned are correct. perhaps, both parties are speculating this too?
for 0.11, you cant expect TG kind of fundamentals, but you can expect more upside here.
IN REPLY TO:-
This is one of the few Co had done 3 Private placements and 2 Right Issue exercise since FY 2016 and still cannot turnaround the Co into profitable position.
Far too many Issue of Shares thru Private Placements (PP) in small quantity and the two Right Issues in recent years with no positive impact on the result due to poor execution. This also reflect on the inability of the Co to raise finance thru the banking system due to probably unfavourable credit rating by banks otherwise you would not raise small amount by PP.
Recently the Co just completed it Right issue exercise on 22 May and raised RM34.7 mil for the purposed stated attached.
The Co share price from 13 April to 22 May on completion of the right issue was from 4 Sen to 5 Sen.
The share price started to trend up after completion of the right issue on 22 May to a high of 19 Sen in 11 June before retracing to 8 Sen on 26 June and closed at 11 Sen.
The announcement of acquiring Pearl Glove and venturing into medical glove industry to me is just another THEMATIC PLAY to GORENG up the share price. Investors need to ask the following questions on the press release on acquisition of Pearl Glove dated 26 June and get convince before you take position, otherwise sell your AT and take profit
1. Has AT turnaround to be profitable? No. I believe it will be reporting a loss for Q4 31 March.
2. Any positive development in AT business generating quantum leap in profit causing its share price to move up from 4 Sen in April to 19 Sen and now at 11 Sen? No
3. Has AT got the cash fund to acquire Pear Glove (manufacturing of industrial glove)? No from the Co Balance Sheet at 31 Dec 2019.
4. Will the Co bankers finance the acquisition? The answer is NO as it is equity financing and there is no visible take off cash inflow for repayment.
The current AT Balance Sheet is already stretched without the right issue and the Co had to do 3 small quantum of PP and 2 right issues within the last 4 years since 2016 make me conclude that AT had hard time raising banking facilities then.
5. Can the Co use the right issued fund for acquisition? No unless it goes back to the authority to change the purpose of utilisation which do not goes well with SC
6. Does it make business sense to acquire an industrial glove player and gradually convert to medical glove business? No business sense as industrial glove player do not have the skill set for manufacturing medical glove which is completely different industry
7. From KLSE Screener: ATS estimated it would require RM180mil for the expansion.
"As a start, the Group intends to allocate approximately RM36mil to install and commission a total of 4 new production lines for the manufacture of medical grade nitrile examination within the next 4 months upon completion of the acquisition," it said. The four new lines will have a capacity to produce 600 million pieces a year.
Can you commission a medical glove production line in 4 mths? Guarantee NO.
It could take 6 mths to 9 mths to set up a line with trial run to commission it. The Co also need Medical Certification Approval after commissioning of production. The Audit by Sirim or International Certifying Body may take 2 to 3 mths to qualify.
8. It would take more than 1 years before u can see medical glove coming out from Pearl Glove “oven” and by then Covid 19 could be over.
9. AT said the expansion plans will be funded via a combination of internal generated funds, bank borrowings and/or fund raising exercises to be determined.
I do not see the Co has internal fund to stomach the acquisition. Bank WILL CERTAINLY RELUCTANT to lend to finance the acquisition. Do not tell me AT is going for another round of right issue or PP??????
I will not buy into AT and be a sucker unless I am in AT just for the Goreng Goreng and play with the market operators.
If I am holding AT, I will take my profit by selling AT