By LYDIA NATHAN / Pic By RAZAK GHAZALI

MESTRON Holdings Bhd is expected to utilise 51.4% of the RM25.8 million that would be raised from its initial public offering (IPO) to expand its current manufacturing facility, which in turn would double the steel pole manufacturer’s production capacity.

The group’s ED Gary Loon said of the total, RM5.18 million will be used for working capital purposes, while RM4 million will go towards reducing the group’s bank borrowings and the remaining RM3.1 million will cover its listing expenses.

He said the company is currently facing limitations due to space restriction in its production, especially on orders for specialty poles.

“Right now, our production rate is about 5,700 metric tonnes (MT) per annum and with the expansion, we target to increase it to 11,400MT per annum,” he told reporters at the group’s prospectus launch in Kuala Lumpur yesterday.

Loon said the facility is slated for completion in two years and will cater to the production of specialty poles like telecommunication poles that support antennas, and oil and gas lamp poles.

“Anything other than conventional poles are considered specialty poles. We want to take advantage of this business segment that is able to provide an even better profit margin. On average, we are getting 30% in net excess in profit and this will be the expected area of growth for the near future,” he said.

According to Loon, since the nature of the business is smaller in quantity, the company is able to have a better command of the market.

He added that prices of raw materials like steel have stabilised, and in recent months, have been on a marginally downward trend.

“We have a comfortable margin to absorb if there is a disruption of prices. As at the end of April, our orderbook stood at RM32 million, which is about half a year’s worth of turnover for us. It will last us for the next 12 months,” he said.

Additionally, Loon said the group is expected to increase its exports to about 15% from the current 10%.

He said 90% of the production would satisfy domestic orders. The company is also actively exporting to other countries like Australia, the Maldives, Sri Lanka, Brunei and Singapore.

“For 2019, we are aggressively targeting three main countries — Brunei, New Zealand and Sri Lanka. We want to intensify marketing efforts to up our presence in those countries,” Loon said.

He is not expecting any direct impact from the trade war between China and the US, but instead views opportunities within the local market.

“It’s true that the property market is not doing so well, but the infrastructure projects in Malaysia are progressing well enough. Before 2016, we had limited opportunities to participate in projects, but post-2016, we had opportunities to contend extensively.

“Our latest work order we secured was for a small part of the Setiawangsa- Pantai Expressway (previously known as the Duta-Ulu Kelang Expressway Phase-3).

“We will provide them with technical expertise and our products, and then negotiate with the contractors,” Loon said.

Mestron will issue 158 million new shares at RM0.16 per share, of which 39.5 million new shares will be available for the Malaysian public via balloting.

Another 8.75 million shares will be for its eligible directors and employees, 30.75 million shares by way of private placement to selected investors, while 79 million shares are earmarked for private placement to identified Bumiputera investors approved by the Ministry of International Trade and Industry.

Mestron is expected to have a market capitalisation of RM126.4 million, while the IPO will be open for subscription from May 23, 2019, till June 3, 2019.