KUALA LUMPUR: Rubber processor and trader Seng Fong Holdings Bhd, which is set to list on Bursa Malaysia’s main market on July 7, plans to raise RM68.11 million from its initial public offering (IPO).
The IPO will involve the issuance of 160.87 million common shares — consisting of a public offering of 90.81 million new shares and an offer to sell 70.06 million existing shares — at an issue price of 75 sens per share.
Seng Fong said in a statement that a retail offering of 42.20 million shares, representing 8.1% of the expanded number of shares issued, will be made available, with 25.95 million shares, representing 5.0% of the expanded number of shares issued Shares reserved for the Malaysian public, 50% of which are reserved for Bumiputra investors including individuals, corporations, corporations, cooperatives and institutions, while 16.25 million shares, representing 3.1% of the expanded number issued Shares reserved for applications by Eligible Persons.
Meanwhile, its institutional offering of 118.67 million shares, representing 22.9% of the expanded number of shares outstanding, will be made available, with 64.87 million shares to be placed through a private placement to Bumiputra investors managed by the Ministry of international trade and industry have been approved, and 53.80 million shares will be made available by way of private placement to other institutional and select investors.
The group will have a market capitalization of RM389.22 million at listing.
Seng Fong Managing Director Er Hock Lai said the group’s immediate goals are to optimize production by increasing total annual capacity by hiring additional workers for a second shift and implementing environmental, social and governance initiatives (ESG) to strengthen the business sustainably.
“We intend to use a portion of the proceeds from the IPO to fund our working capital needs to expand annual production capacity from current capacity of 142,000 tons to 166,000 tons by 2023. To further our ESG initiatives, we are also using the proceeds from the IPO to repay bank loans we used to install two solar systems that will help reduce overall electricity costs,” he announced today during the launch of the virtual prospectus of the group.
“We are also using the proceeds from the IPO to install two biomass systems that use woodchips and replace diesel to reduce overall fuel costs for our factories. We estimate that using the solar systems will save RM2.6 million while the biomass system will help us save RM3.5 million. In addition to cost savings, using renewable energy to reduce electricity and fuel consumption aligns with our emphasis on sustainable business operations and the need to care for the environment.”
He added that the group, building on its solid fundamentals and business reputation, intends to propose to shareholders at least 50% of its annual net income as a dividend, subject to board and shareholder approval.
Lee Jim Leng, Group Managing Director and CEO of Hong Leong Investment Bank (HLIB), believes that Seng Fong will be able to use this IPO to achieve his immediate goals while maintaining his presence in the international rubber processing market to strengthen.
“Nearly all of Seng Fong’s revenue comes from sales to international customers for FY19-21. For the nine months ended March 31, 2022, Seng Fong reported net income of RM31.32 million and revenue of RM662.43 million .”
HLIB is the underwriter and placement agent for Seng Fong’s IPO.
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