Ancom Logistics share price pares gains after rising to record high on planned RTO

KUALA LUMPUR (July 20): Ancom Logistics Bhd’s share price closed up 4.5 sen or 10.59% at 47 sen after soaring to its all-time high of 56 sen earlier today on a proposed reverse takeover (RTO) which entails the acquisition by Ancom Logistics of the entire share capital in national security solutions provider S5 Holdings Inc and planned disposal of Ancom Logistics’ core business to Nylex (M) Bhd.

At 5pm, Ancom Logistics saw some 202 million shares changing hands. At 47 sen, Ancom Logistics has a market capitalisation of RM222.45 million.

On Thursday (July 16), Ancom Bhd and My EG Services Bhd (MyEG) said in separate Bursa filings that Ancom Logistics has entered into a heads of agreement with S7 Holdings Sdn Bhd, Merrington Assets Ltd, MY EG Capital Sdn Bhd and Avocat Sdn Bhd (collectively known as vendors) to undertake the proposed RTO and the planned disposal of Ancom Logistics' core business to Nylex.

Ancom Logistics and Nylex are subsidiaries of Ancom Bhd while MY EG Capital is a wholly-owned subsidiary of MyEG.

The vendors are shareholders of S5, which was incorporated in Labuan. S5 subsidiaries include S5 Systems Sdn Bhd, which provides national security solutions involving security technology intellectual property.

The proposed RTO will entail acquisition by Ancom Logistics of the entire share capital of S5 from the vendors at a price to be agreed by the parties and in return, Ancom Logistics shall issue new shares as payment to the vendors.

Upon completion of the S5 acquisition, the vendors will make a mandatory general offer for Ancom Logistics shares which are not owned by them while Ancom Logistics will undertake a private placement of new shares in Ancom Logistics.

The vendors will also make an offer for sale of part of the Ancom Logistics shares to be held by them, to independent third party investors upon completion of the S5 acquisition.

The proposed disposal of Ancom Logistics’ subsidiaries to Nylex will be done at a valuation to be agreed by Ancom Logistics and Nylex and based on terms and conditions to be determined later.

Today, CGS-CIMB Securities Sdn Bhd analyst Mohd Shanaz Noor Azam wrote in note that the RTO offers an avenue for MyEG to unlock its investment in S5, whereby the shares held by MY EG Capital would be listed on the ACE Market of Bursa Malaysia.

"We see the MyEG-S5 partnership as complementary to each party's solution and provide synergy to existing and prospective service offerings in Malaysia's immigration space. Both parties are working together for the new National Immigration Integration System (NIISe) project, which we expect could be awarded in 3Q20.

"We see potential award of contracts for the Visa Luar Negara and NIISe projects as re-rating catalysts for the stock (MyEG), while delays in the e-government service concession and failure to secure e-visa and NIISe contracts are key downside risks to our call,” Mohd Shanaz said.

MyEG’s share price closed down one sen or 0.68% at RM1.47 for a market capitalisation of RM5.1 billion. The stock saw some 17 million shares traded.