Mun Siong Engineering to plough US$7.5 million into Illinois expansion

MAINBOARD-LISTED Mun Siong Engineering plans to invest US$7.5 million in a push into Illinois, the industrial services provider announced in a bourse filing on Sunday (May 15).

The diversification is part of an effort to mitigate market and customer concentration risk, especially as the group has observed that the process industry in North America – unlike its other markets in Asia – has a range of large and mid-sized operators, the board said.

Most of the investment sum – which is being funded by a mix of internal resources and bank borrowings – will go towards buying and equipping a property in Kankakee County through wholly owned Pegasus Industrial Midwest. The property was previously used by a structural steel fabrication company and is being sold by the estate of the owner, who died in late 2021.

Mun Siong’s strategic expansion targets process and power operators in the Midwestern United States, by entering the market with one-stop specialised services such as industrial cleaning and repairs of heat exchangers, before expanding into retubing, decoking and fabrication.

“Recent experiences in Taiwan and Malaysia would help us navigate some of the challenges in establishing presence in this new market,” the group said.

The board noted that the property, which is about 70 km south of Chicago, is located near “a number of large to medium-sized refineries and processing plants” that are potential customers.

The transaction will be done in an interested-person transaction in an assignment agreement involving a US limited liability company controlled by Mun Siong director and substantial shareholder Quek Kian Hui, whose mother is the executive chairman of Mun Siong.

The seller did not agree to a conditional option, while an unconditional option would require shareholders’ prior approval. As such, the role of the assignor will enable “acquisition of the property in an expedient manner”, the board said, in discussing the structure of the transaction.

Gearing would have increased to 11.9 per cent after the investment, from 10 per cent before, according to the pro forma financial effects of the deal as disclosed in the bourse filing.

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Separately, Mun Siong reported a pre-tax net loss of S$320,000 in a first-quarter business update for the 3 months to Mar 31, 2022, narrowing from S$1.3 million the year before.

Turnover rose by 13.9 per cent year on year to S$15.6 million, which the group attributed to the recognition of revenue from an ongoing turnaround project in Taiwan.