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Singapore Investment

 SMRT 0117 SMRT HOLDINGS BERHAD touches 8-year high with 280% jump in share price. Will its focus in tech sector pay dirt?

SMRT Holdings Bhd has been a regular name on Bursa Malaysia top actively traded counter.

Interestingly, shares in SMRT Holdings Bhd were actively traded with its share price surging more than 22% to reach an eight year high of 47 sen on Feb 27.

This is a pretty remarkable run from its 52-week low of 10 sen.

The ACE Market-listed education and human resource provider is not exactly a ‘sexy’ counter.

But it soon attracted investors’ attention after recent a proposed business reorganisation, which involves exiting the education business to become a pure play IT solutions firm.

This was via the acquisition of the remaining 36% stake not already owned by the group in N'osairis Technology Solutions Sdn Bhd (NTS) for RM72 million cash.

NTS, an IT managed service provider,NTS is a profitable company, posting a net profit of RM20.11 million on revenue of RM51.1 million for the financial year ended Dec 31, 2021.

Its 9MFY22 net profit of RM19.4 million for SMRT tech segment has exceeded FY21 full-year net profit of RM17.5 million.

Back of the envelope calculation, the acquisition tag of RM72 million values the entire NTS at RM200 million.

At a closing price of 46 sen, SMRT has a market cap of RM203.6 million.

If the proposals go through, many are expecting the tech company to enjoy high profit margin, high ROE, healthy balance sheet, good cashflow as it could potentially benefit from the rollout of 5G network.

NTS, an end-to-end provider of IoT solutions in Southeast Asia, is currently a 64%-owned subsidiary of SMRT.

It handles all the nitty-gritty details so that the clients can leverage the power of the Industry 4.0 revolution and run their businesses more efficiently.

Currently SMRT’s technology segment has 2 subsidiaries, namely NTS (64% stake) and Talentoz Sdn Bhd (55% stake).

SMRT said it is also proposing to dispose of its entire stake in SMR Education Sdn Bhd to Special Flagship Holdings Sdn Bhd for RM49.5 million cash.

The company explained that  its education business that has not been a strong contributor to its financials.

SMR Education currently holds a 42.08% of Minda Global Bhd.

Post proposed disposal, SMRT will cease to hold 100% stake in SMR Education and 42.08% in Minda Global.

The two proposed deals are deemed related party transactions (RPTs) as Tan Sri Palan Ramanathan Chettiar and his spouse Puan Sri Kamatchi Valliammai Malayandi are major shareholders of SMRT.

Their son Maha Ramanathan Palan, who is the group managing director of SMRT, is also a shareholder of NTS and Permata Kirana.

SFHSB is jointly owned by Palan (with a controlling equity interest of 99.99%), while the remaining 0.01% equity interest is held by Kamatchi.

It appears that SMRT is moving in the right direction to allow Minda Global to be the education arm while it solidifies its business in the tech segment.

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