Dragon Group International (DGI) has announced the first of what could lead to a series of acquisitions to transform itself.
The move comes six months after DGI sold its core electronics business to a firm co-founded by former Apple boss John Sculley.
The mainboard-listed firm is sitting on a cash pile of US$17.2 million (S$21.4 million) as a result of the disposal.
Tuesday, the firm said it plans to acquire Australian firm AMMS Group's industrial and resources maintenance business for A$12 million (S$14 million) to A$18 million.
DGI said the transaction is at a preliminary stage and the purchase price will be based on three to 4.5 times of AMMS' forecast earnings for financial year 2014.
The deal includes a two-year profit guarantee of A$4 million for financial year 2014 and A$5 million in 2015 by the vendors.
"This acquisition by itself is not a very big transaction. But it is the beginning of a journey of many possibilities that began way back in 2005 and got interrupted by the global financial crisis," said Mr Michael Loh, DGI's executive chairman and chief executive.
He added that DGI was no longer shackled by its electronics business and had cash in hand.
Funding details for the purchase of AMMS, a Perth-based engineering specialist for resource firms, have yet to be finalised.
"Funding is not a road block. We can do it through shares, cash or a combination or through some financing instrument that's acceptable to DGI," he said.
The Penang-born Mr Loh, 57, who has spent 20 years in Silicon Valley, is the majority shareholder of mainboard-listed Asti Holdings, which owns 54 per cent of DGI. He is Asti's executive chairman and helms its Catalist-listed subsidiary Advanced Systems Automation.
Formerly Flextech Holdings, DGI sold its electronics component distribution business to InflexionPoint Technologies, a global IT supply chain firm co-founded by Mr Sculley and partners, for US$19.4 million. The disposal, finalised in May, was aimed at cutting the group's liabilities.
DGI, an investment holding firm, had a third-quarter net loss of US$713,000. Its main businesses now include Spire Technologies which distributes electronic components and test consumables, and Dragon Treasure Boat, which excavates and reproduces the Zheng He treasure boat, a joint venture with the Gulou district government of Nanjing.
There may be more to come, hinted Mr Loh. "DGI has been in search of a soul for a long while. We are finally in a position to explore the opportunities out there as we are now light and have the room to manoeuvre," he said.
Pitching its appeal to investors after the hard-to-forget bashing of three penny stocks may be tough. Since the plunge in the share prices of resource and mining firms Blumont Group and LionGold, with private equity Asiasons Capital, penny stocks and, particularly, those involved in the resource sector have drawn added market scrutiny.
"While that may be a concern, one should not let it get in the way of what is fundamentally the right thing to do. One should judge us based on our track record and credibility," said Mr Loh.
DGI shares rose 0.3 cents to 12.3 cents Tuesday before trading was halted at 11am pending the announcement.
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