G Neptune Bhd would enter the high-rise residential construction management services market, as part of its proposed regularisation plan to resolve its Guidance Note 3 (GN3) status.

The ACE Market-listed firm slid into GN3 classification in December 2017. The stock was last traded at 1.5 sen on Dec 11, 2020, making it worth around RM4 million

G Neptune intends to acquire Southern Score Sdn Bhd from Super Advantage Property Sdn Bhd for RM252 million, which would be paid for by the issuance of 1.68 billion shares for 15 sen each.

The acquisition is essential to G Neptune's regularisation because it will give the company a new core business that will allow it to remain listed while entering the construction sector. This comes after its old business of providing information technology solutions to the garment and textile manufacturing industries was discontinued in 2018.

Southern Score provides construction management services for residential high-rise buildings and is anticipated to profit from the robust construction market in 2018.

The company recorded net profit of RM6.51 million, RM19.2 million, and RM35.18 million, in the fiscal years 2019, 2020 and 2021, respectively, G Neptune said in a filing with the stock exchange yesterday.
The seller of Southern Score, Super Advantage, has guaranteed a cumulative net profit of RM80 million for the transaction from 2022 to 2024. It is controlled by Southern Score's managing director Tan Sri Gan Yu Chai as well as executive director and chief executive officer Gan Yee Hin, according to G Neptune.

In addition to the acquisition, the regularisation plan includes the proposal to convert every 10 existing G Neptune shares into one share, a debt settlement of RM3.1 million with executive director Chai Tham Poh through the issuance of 20.67 million shares, and a private placement of 543.05 million shares at an issue price to be determined later but not less than 20 sen per share to qualified investors.

G Neptune said in the filing that the funds raised would be used to pay for building supplies, contractors, and TCS SS Precast Development Sdn Bhd (TSPC), a contractor in which Southern Score owns a 35 per cent share, as well as for future construction projects.

"We also intend to venture into the manufacturing of Industrialised Building Systems products through TSPC, as we see demand rising, given that the construction sector is moving towards the adoption of IBS for better construction quality and productivity, less dependency on foreign labour, as well as lower costs," Yee Hin said.

Kenanga Investment Bank Bhd is the principal adviser and sponsor for the proposed regularisation plan, and placement agent for the proposed private placement.