Orgabio targets RM30m from IPO, listing expected in July

Applications for the public issue subscription are open from today and will close on June 21, 2022, at 5pm

by NURUL SUHAIDI / pic by Orgabio

ORGABIO Holdings Bhd — en route to listing Bursa Malaysia’s ACE Market — is aiming to raise RM30 million from the IPO at 31 sen per share to fund its expansion plans.

The group said with the launch of the prospectus today, applications for the public issue subscription are open from today and will close on June 21, 2022, at 5pm.

The IPO involves the issuance of 96.7 million new shares representing 39% of Orgabio’s enlarged share capital.

From the total of RM30 million, the company said RM16 million of the proceeds are earmarked for the construction of a new factory, RM1.14 million for working capital, RM3.6 million estimated for the listing expenses and labour, while RM 2.2 million is allocated for the acquisition of machinery.

Orgabio CEO Ean Yong Hien Voon said proceeds from the IPO will mainly be used to fund and repay bank borrowings secured for the construction of its new factory in Semenyih, Selangor.

“We intend to set up a new factory to increase our manufacturing capacity and enhance the efficiency of our manufacturing through the construction of a new factory.

“The new factory also enables us to expand the manufacturing volume for direct selling to not just secure the local market and companies but enhance the overseas market growth,” he said during the virtual prospectus launch today.

Tentatively, Orgabio is scheduled to be listed on the ACE Market by December 2021, however, has been delayed to the current date.

Voon said the delay was caused by a pending factory audit by the Ministry of Health that arose from a backlog during the Movement Control Order, hence prolonging the issuance of the necessary certificate was required prior to the prospectus launch.

Overall, he added the company is optimistic about the industry outlook and said the shift in customer power purchase in which users are opting for more cost-effective and convenient beverage products.

“Looking at the trend, we will continue to expand our range of product offerings, and will introduce more products under in-house brands.”

Currently, the group depends on its third-party brand for its product distribution such as Hai-O Enterprise Bhd, TDC Avenue Sdn Bhd, Lotus’s Stores (M) Sdn Bhd and more.

“However, moving forward, we are open to new opportunities for continued collaboration that may be appropriate if the timing is right,” Voon added.

Its two major customers Hai-O and TDC Avenue have collectively contributed 69.58%, 75.75% and 64.59% to its group’s revenue for the financial year ending 2020 (FY20), FYE21 and FPE22 respectively.

“Any loss of these major customers and our inability to cater to these customers will have an adverse risk on our financial performance,” it said.

Not only that, the prices of coffee powder, milk powder, creamer and sugar, as well as packaging — which fluctuate with global commodity prices — also have posed a similar impact.

“Responding to the current inflations, previously we had to reasonably pass on any increase in the cost of supplies to our customers in order to maintain the profit margin.”

According to Voon, the imposed escalating costs will last longer depending on how long inflation continues.

Nonetheless, the group is optimistic about the growth given its competitive strengths as well as its expansion strategy in place.

The company said the 18.6 million new shares will be made accessible to the Malaysian public, as well as the company’s qualifying directors and workers, and those who have contributed to the group’s success.

While the remaining 78.1 million new shares in the IPO will be distributed to selected Bumiputera investors approved by the Ministry of International Trade and Industry and selected investors by way of a private placement.