The group will utilise the proceeds to set up an IBS facility and upgrade software systems, says group MD
by HARIZAH KAMEL / Pic Source: Nestcon
NESTCON Bhd aims to raise about RM45 million from its listing on the ACE Market to fund its expansion plans.
Nestcon’s IPO entails a public issue of 161 million new shares, with 32.2 million shares made available for the Malaysian public at an issue price of 28 sen a share.
The group is slated for listing on June 29, 2021, with a market capitalisation of RM180.27 million.
Group MD Datuk Dr Lim Jee Gin said the group will utilise the proceeds to set up an industrialised building system (IBS) facility and upgrade software systems to reduce dependency on human labour, as well as improve operational efficiency.
“Correspondingly, we intend to acquire more equipment and machinery to strengthen our technical capabilities to take on larger projects, as well as further expand and penetrate into other segments, such as renewable energy,” he said during the group’s virtual prospectus launch yesterday.
About RM6 million (13.3%) of the proceeds will be allocated for establishing an IBS facility for the building division, RM6.6 million (14.7%) for the acquisition of machineries and equipment for business expansion in the civil engineering and infrastructure division, and RM1 million (2.2%) for upgrading of software and systems.
The remaining RM16.5 million (36.6%) will be used to repay bank borrowings and RM11 million (24.3%) for working capital purposes.
M&A Securities Sdn Bhd is the advisor, sponsor, underwriter and placement agent, while Eco Asia Capital Advisory Sdn Bhd is the financial advisor.
Nestcon specialises in construction of buildings, as well as civil engineering and infrastructure works.
The company has an extensive portfolio of 29 completed contracts totalling RM981.6 million from both segments of the business.
It currently has 22 ongoing contracts worth RM1.9 billion, of which RM1.2 billion remains unbilled, representing 4.13 times of its four-year average revenue of RM293.97 million.
The group expects the unbilled portion to continue contributing positively to its financial performance until 2023.
Nestcon’s tender sum has grown to about RM2.8 billion with a good balance of tenders from its building and infrastructure segments.
Lim said while the group’s revenue in the financial year 2020 (FY20) was marginally affected by the first Movement Control Order, its profit performance remained intact with profit after tax and non-controlling interests margin improving from 3.5% in FY19 to 4.2% in FY20.
“Our cashflow from operating activities was also positive as at Dec 31, 2020. We believe the results speak volume of the capabilities of our management team in manoeuvring through tough times.
“After a year of muted growth, it is encouraging to witness the upward trajectory in domestic economic activities and recovery momentum in the construction sector. We are seeing project tenders increasing albeit at a slow pace,” he said.
The group remains optimistic about its growth prospects, underpinned by the positive outlook of the construction industry.
In relation to the rising cost of building materials, especially steel prices, Lim said the matter will not give a significant impact to the group due to its diversified portfolio.
“It is true that prices of building materials such as steel have gone up, however, the usage of steel varies depending on the completion stage of our project. We have ongoing projects that are at different stages of completion and as a result, some would require less amount of steel.
“Based on our assessment, the overall impact is not material at this junction. Furthermore, Nestcon’s diversified portfolio between the infrastructure and building segment has helped reduce the impact to the group as a whole as the usage of steel on ongoing civil engineering projects is not significant,” he explained.