HG Metal will fund the acquisition internally, initially acquiring 72.29 per cent of the enlarged share capital of Niho. Niho recorded $7.3 million in revenue for FY2004 and 2005, and 56.1 per cent increase in net profit from $123,000 to $192,000 for FY2005.

Commenting on the acquisition, HG Metal CEO Wee Piew said: 'We believe this acquisition will significantly broaden our steel product offerings and give us a much stronger platform in Asia . . . We expect Niho to achieve at least $20 million in sales in two to three years' time and it could be eventually listed.'

Niho supplies stainless steel coils and provides customised metal processing services to various metal stamping and electronic companies in South-east Asia and China. HG Metal, which offers over 2,000 types of steel products for industrial and engineering applications, will be adding stainless steel to its product range as a result of the acquisition. It will also widen its customer base to the metal stamping and electronics industry.

Niho plans to use the $1.5 million investment from HG Metal to raise its market share by increasing its working capital for Singapore operations and expanding its manufacturing capacity in Kunshan, China.

With the increased capital, Niho also hopes to diversify its product range for the building and engineering sectors. Mainboard-listed precision sheet metal stamping service-provider Amtek is Niho's major client.

The acquisition is not expected to have any material impact on the net total assets or earnings per share of HG Metal for the financial year ending Sept 30, 2006.