Chin Hin Group Bhd (KL) is expanding its footprint in Malaysia’s engineering and construction sector by acquiring a 65% stake in two key companies: CSS Engineering & Construction Sdn Bhd (CEC) and Critical System Specialist Sdn Bhd (CSS). The acquisition, valued at RM51.51 million, will be executed through a combination of cash and shares, further positioning Chin Hin to capitalize on the booming data centre market.
Details of the Acquisition
Chin Hin’s acquisition involves a total cash payment of RM26.51 million and the issuance of 7.91 million shares at RM3.16 each, amounting to RM25 million. The shares are priced at a 4.98% premium, or 15 sen above the market price, which closed at RM3.01 on Tuesday. The stakes are being acquired from two individuals, Liew Choon Fui and Teng Bee Ling, who are pivotal figures in the management of these companies.
Strategic Importance of the Acquisition
CSS and CEC are recognized pioneers in the engineering, procurement, construction, and commissioning (EPCC) of data centres (DC) in Malaysia. Their customer base includes prominent names across various sectors such as Bank Negara Malaysia, Starhub, Macquarie, DHL, and NTT Communications. These companies have established a strong reputation in the industry, with CSS currently nearing the completion of a significant project for Sarawak Digital Economy Corpโs container data centre, achieving 90% progress to date.
CEC, on the other hand, completed notable works in 2022, including subcontracting for Telekom Malaysia Bhd to provide mechanical and electrical services at TM Kelana Jaya and TM Iskandar Puteri Data Centre (IPDC) in Johor.
Financial and Business Impact
The sellers have provided a profit guarantee, ensuring an after-tax profit of RM12.39 million for FY2023 and RM8.89 million for FY2024. This guarantee offers Chin Hin clear profit visibility, supported by CSSโs robust order book, which stands at RM388 million following the completion of these transactions.
Chin Hin Groupโs managing director, Chiau Haw Choon, expressed confidence in the acquisition’s potential. “With CSSโ 21 years of proven expertise in EPCC, we are well-prepared to capitalize on the booming growth in the data centre sector,” he said.
Furthermore, Chin Hin could leverage its existing resources to supply building materials such as concrete lightweight panels, blocks, steel structures, metal roofing, and insulationโkey components in data centre engineering and construction.
Market Response
Chin Hinโs strategic acquisition has been well-received by the market, with the companyโs shares closing six sen or 2.03% higher at RM3.01, bringing its market capitalization to RM11.03 billion. The counter has seen a substantial increase of 70.5% this year, reflecting strong investor confidence in the company’s growth trajectory.
Conclusion
Chin Hin Group Bhd’s acquisition of stakes in CSS Engineering & Construction and Critical System Specialist marks a significant step in its expansion strategy. By integrating these companies’ expertise in the data centre sector, Chin Hin is well-positioned to benefit from the sector’s rapid growth, further solidifying its market presence. As Malaysia continues to develop its digital infrastructure, Chin Hin’s strategic investments are set to yield substantial returns, making it a key player in the industry.
