KUALA LUMPUR: Grand-Flo Solution Bhd has established a presence in Vietnam, with its Thai-listed associate Simat Technologies Public Company Ltd acquiring a 40% stake each in Sino Company Ltd, a tracking solutions provider, and High Rich Trading & Service Company Ltd, a barcode labels manufacturer, for a total of RM2.4 million cash.
In a statement yesterday, Grand-Flo said the acquisition marked the group's fourth direct presence in the Southeast Asian region after Malaysia, Thailand and Singapore. Simat is a 36.75% associated company of Grand-Flo.
Grand-Flo, an integrated tracking solutions provider, signed the sale and purchase agreement in Bangkok yesterday. Signing on behalf of Simat was its chief executive officer Thongkam Manasilapapan, while Nguyen Quyet Thang, president of Sino and High Rich, signed on behalf of the acquired companies.
Grand-Flo's group president and managing director Derrick Tan said: "There is a growing demand for tracking solutions in the country. Among the main factors driving this growth is the increasing inflow of foreign direct investment into Vietnam, backed by more multinational companies setting up their facilities there."
"More noteworthy, too is that Vietnam is becoming increasingly popular as an alternative manufacturing hub to China. This is evident from the increasing number of customer requests through our local clientele to provide tracking solutions in Vietnam," he added.
Tan said the foreign direct investment inflow for Vietnam, according to the Ministry of Planning and Investment of Vietnam, was expected to reach US$14.5 billion (RM46.4 billion) in 2008, growing 11.5% from last year's estimated US$13 billion.
"This acquisition enables us to not only leverage on the acquired companies' knowledge of the Vietnam tracking solutions industry but also tap into their distribution channel, ensuring an instantaneous entry into the Vietnamese market at a low entry cost. With this acquisition, we are a step closer towards becoming a truly regional player," Tan said.
Under the agreement, Sino and High Rich will provide a combined profit guarantee of about RM2.2 million over two years. Tan said with a total valuation of about RM6 million for both companies, it worked out to an earnings multiple of about 5.5 times.
He added that the acquisition would be financed by Simat's internal funds, which will be paid in three tranches within two years.
Thang said "This partnership with a reputable entity like Grand-Flo is certainly a significant development for us, as we stand to gain from the technological knowhow of the parent company, giving us the competitive edge over the other local tracking solution players."
"Traditionally, we have been strong in the manufacturing sector. With the partnership, we will be able to tap into the group's wider regional customer base in other industries such as electronics and FMCGs (fast moving consumer goods), and more importantly their broader product offerings."
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