Southern Cable to raise RM71m on ACE Market

The IPO entails a public issue of 209.3m new shares and 20m existing OFS shares at an issue price of 34 sen per share


CABLE and wire manufacturer, Southern Cable Group Bhd, plans to raise RM71.2 million from its ACE Market listing and use the money to expand its business overseas and upgrade its machineries.

The group services various industry sectors such as power distribution and transmission, telecommunications, building and construction, infrastructure, manufacturing and processing industries, including oil and gas processing and petrochemical plants.

Its top five major customers are government-linked companies (GLCs) like Tenaga Nasional Bhd (TNB) and Telekom Malaysia Bhd (TM).

It has also supplied cables and wires for Rapid (refinery and petrochemical integrated development) project in Pengerang, Johor, and the Mass Rapid Transit Sungai Buloh-Kajang projects.

Southern Cable MD Tung Eng Hai (right) said the group eyes ACE Market listing on Oct 16, and it will not be delayed despite the rise of Covid-19 infections.

“We cannot wait until the market is good. We need to follow our plan. By next year, it looks like the economy will be good, so there will be more infrastructure investments. We work with both GLCs and resellers. For the GLCs, we participate in whatever tender is offered,” he told reporters after the launch of the group’s IPO prospectus in Kuala Lumpur yesterday.

Southern Cable’s projects with GLCs are contract-based. The company now has a one-year contract with TNB and a three-year contract with TM, while the manufacturer uses purchase-order based system for resellers.

The company will allocate RM30 million of the money raised for capital expenditure and expansion.

Of this, RM18.5 million will be used to purchase and upgrade machinery and equipment, RM7.5 million for the construction of new factories and RM4 million for funding the purchase and installation of enterprise resource planning information technology system.

Some RM27.5 million of the proceeds will be set aside as working capital, while RM9.2 million will be utilised for repayment of bank borrowings. The remaining RM4.5 million will be to defray estimated listing expenses.

When asked of plans to expand overseas, Tung said the company now has distributorships in Myanmar and Cambodia, but will keep an eye for other opportunities in the South-East Asian region.

Tung said the group will build three new production facilities to boost annual production capacity of cables, wires and plastic compound material.

Two of the new factories will be near its current production plants in Kuala Ketil, Kedah, and will increase its total built-up area from 416,000 sq ft to more than 480,000 sq ft.

“Together with the purchase and upgrade of machinery and equipment, we expect to increase our annual production capacity of cables and wires by 29% to 40,130km by the first half of 2022 (1H22) compared to our existing annual production capacity of 31,080km in 2019.

“We are also setting up a new polyvinyl chloride (PVC) compound production plant next year to our current factory in Sungai Petani, Kedah, by 1H20, which we target to increase our manufacturing capacity of PVC compound by 4,200 tonnes to 12,000 tonnes per year,” he said.

Southern Cable’s IPO entails a public issue of 209.3 million new shares and offer for sale (OFS) of 20 million existing shares at an issue price of 34 sen per share. Application for the IPO is open from yesterday until Oct 6.

According to the Industry Overview report by Vital Factor Consulting Sdn Bhd, the market size for the manufacture of electric and electronics cables and wires in Malaysia was valued at RM10.3 billion, and Southern Cable commanded an estimated 6% market share.

From the financial year ended Dec 31, 2016 (FY16), to FY19, its group revenue increased from RM470.7 million to RM656.7 million, reporting a three-year compound annual growth rate (CAGR) of 11.7%.

Its net profit reported a three-year CAGR of 26.4% from RM14.2 million to RM28.5 million for the same time frame.

Southern Cable intends to implement a dividend policy of distributing a minimum of 15% of its annual net profit to shareholders.