Pruksa Holding has swapped 51% of its shares in Inno Precast Co., Ltd., a subsidiary of Pruksa, to invest in an 18.26% stake in General Engineering Public Company Limited (GEL) at a price of 0.37 Baht per share. This totals approximately 582 million Baht, propelling GEL to become the largest precast producer in Thailand, with immediate revenue growth nearly doubling. It is expected to generate profits and reduce average costs per unit from orders from Pruksa and other future clients, while Pruksa's precast business will benefit from specialized expertise, cost reduction, new customer base expansion, and increased continuous revenue.

Mr. Uthen Lohachitpitak, CEO of Pruksa Holding Public Company Limited (PSH), revealed that after Pruksa Holding restructured its organization by separating the precast business to establish “Inno Precast Co., Ltd.” for the production and sale of precast products, it has created Thailand's first green precast factory (Green Factory) using the “Zero Waste” concept and imported the “Carbon Cure” green technology, being the first in the real estate development group to produce low carbon precast slabs. Recently, the board of directors of Pruksa Holding approved the use of 51% of Inno Precast's common shares to settle the share value with General Engineering Public Company Limited (GEL), where GEL will issue new shares and allocate them to Pruksa Holding at a price of 0.37 Baht per share, which is 37% higher than the average market price over the past 15 trading days (totaling approximately 582 million Baht). It is expected that the transaction will be completed by May 2023.

This share swap is considered a mutually beneficial agreement for both companies (Win-Win) as Pruksa Holding recognizes GEL's potential as a leading manufacturer and distributor of construction materials with a strong customer base and a wide range of essential products for real estate development, including prestressed concrete piles, precast products, bored piles, cement soil piles, and precast concrete components for public utilities, among others. With extensive experience in producing and selling precast products to real estate and construction clients, after the share exchange in Inno Precast, which delivers precast products to Pruksa, GEL will have increased growth opportunities by expanding its precast production capacity, reducing average costs per unit (Economy of Scale) from orders exceeding 2 billion Baht per year from Pruksa and an additional backlog of over 500 million Baht from other clients in the future, enhancing its sales capabilities beyond the targeted 1 billion Baht. This will increase revenue recognition opportunities while Pruksa will benefit from reduced material costs for real estate development and continuous revenue recognition from its investment in GEL.

 

Currently, GEL's clients are continuously expanding and growing their businesses, resulting in GEL's precast order volume exceeding its production capacity. Therefore, after the share swap is completed, combining the production capacity from Pruksa's precast factory will make GEL the largest precast producer in Thailand, increasing its production capacity from 0.8 million square meters per year to 5.2 million square meters per year. Pruksa is confident that holding shares in GEL will provide continuous revenue growth for the company due to GEL's high experience in the construction materials business and marketing expertise, which will help expand its customer base and maximize the utilization rate of Inno Precast's current remaining capacity.

“Additionally, GEL has a variety of concrete products such as prestressed concrete piles, precast beam components for buildings and public utilities, construction chemicals, and has subsidiaries producing high-strength steel wire (PC Wire, PC Strand, and Cold Drawn) and spun piles, which will help Inno Precast grow by fully utilizing its production capacity. The benefits from this business collaboration will also provide Pruksa with opportunities for increased recurring income from its 18.26% stake in GEL and 49% in Inno Precast. Furthermore, it is expected that Pruksa Holding's net profit in 2023 will grow from accounting gains of approximately 700 million Baht (calculated from GEL's share price at 0.37 Baht per share) from the transaction, subject to verification and auditor approval,” Mr. Uthen added.

 

Mr. Thitipong Tangpunpholwiwat, CEO of GEL, stated that GEL is moving towards becoming a leading manufacturer and distributor of construction materials, aiming to be the largest precast producer in Thailand and the only producer of low carbon precast in the country. After this business partnership with Pruksa, Inno Precast will become a subsidiary of GEL, which will nearly double GEL's revenue from consolidating financial statements with Inno Precast, which will be able to grow continuously from existing customer orders, including those from Pruksa and other future clients, helping to reduce average costs per unit (Economy of Scale) in the long term. The company also has a strategy to create a platform to apply better technology, improving costs and benefiting the overall customer base.

Moreover, the green technology from Inno Precast will enhance the ability to expand the market to environmentally conscious customer groups, which will lead to GEL's continuous growth from a strong customer base, increased production capacity, and stable revenue generation, strengthening its financial position and significantly improving GEL's performance, thus increasing its credibility with financial institutions and investors. The transaction will be completed after approval from the shareholders' meeting of GEL scheduled for May 2023.

“The partnership with Pruksa Holding and holding a 49% stake in Inno Precast, which has a precast factory utilizing advanced automated technology and the “Zero Waste” concept to deliver low carbon precast slabs, will provide GEL with technology transfer opportunities and high-efficiency automation, which is expected to reduce GEL's production costs by 5-7% in the long run, along with opportunities to expand its customer base in environmentally friendly product segments (ESG/Low Carbon product),” Mr. Thitipong concluded.