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Falling Knife of the Week: Jubilee Industries Holdings Limited

knife

This week’s Falling Knife, Jubilee Industries Holdings (SGX: 5OS),has fallen by 15.3% to $0.10 since last Friday’s close at S$0.118.

Headquartered in Singapore, Jubilee Industries designs, fabricates, and sells precision plastic injection moulds, precision plastic injection moulding (PPIM) services and other PPIM-related value added services for consumer electronics, computer peripherals, automotive, and household appliances. Its production facilities can be found in Malaysia and China.

On 11 July 2014, Jubilee announced it will be making two acquisitions. The first is a 26% stake in EG Industries, a Malaysia-listed electronics manufacturer which happens to be the country’s largest electronic manufacturing services player. The second is the electronics component distribution business of WE Holdings (SGX: 5RJ), WE Components (WEC).

For a total sum of RM21 million (around S$8.4 million), Jubilee would be getting 19.5 million shares in EG Industries (for around RM1 each) as well as 3.7 million warrants. Meanwhile, the sums for WEC aren’t determined yet, though it has already been decided that Jubilee would be paying WE Holdings a premium to WEC’s net tangible asset value.

Jubilee Industries commented on the acquisitions:

“We see positive synergies from both acquisitions to accelerate our growth strategy. The vertical integration of EG Industries will complete our entire supply value chain to generate cost and operating efficiencies, while the design expertise of WEC will value-add EG Industries’ R&D capabilities to help us achieve an ecosystem of technological innovation. In creating a comprehensive one-stop solution, we will have an integral platform to increase our growth opportunities through the delivery of economies of scale, quality and convenience for our global customers. This is a milestone development as we usher in a new era of growth for Jubilee Industries.”

It should be noted though that nothing’s set in stone yet between Jubilee and WE Holdings as both parties have only entered into a non-binding memorandum of understanding.

Jubilee and WE Holdings are trading at 0.66 times and 1.15 times their book values respectively. Shares of WE Holdings closed at $0.016 on Thursday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.