Seng Fong to raise RM68m from IPO

by AZALEA AZUAR / pic source sengfongholdings.com

SENG Fong Holdings Bhd targets to raise approximately RM68.11 million from its IPO.

From the total, the rubber processor and trader company said that RM19.7 million is earmarked for working capital purposes, RM37.9 million for repayment of bank borrowings, RM6.3 million for the installation of a biomass system and the remaining RM4.2 million for listing expenses.

On Tuesday, it debuted on the Main Market of Bursa Malaysia Securities Bhd with an IPO of RM0.75 sen per share.

The company is currently offering a total of 160.9 million shares where 90.8 million are new shares while 70.1 million of them are for sales.

Seng Fong’s IPO will issue 31% of its enlarged number of shares (160.87 million) which consists of a public issue of 90.81 million shares and an offer for sale of 70.06 million shares.

According to its MD Er Hock Lai, they plan to channel their IPO funds to increase their annual production capacity to 166,000 metric tonnes (MT) by 2023 from the current capacity of 142,000MT.

“To further our environmental, social and governance (ESG) initiatives, we are also using the proceeds to repay bank borrowings that we have used to install two solar systems that will help reduce overall electricity expenses.

“We are also allocating funds raised from the IPO for the installation of two biomass systems using wood chips and replacing diesel to reduce overall fuel costs for our factories,” he said during his speech.

Seng Fong estimated it will save RM2.6 million and RM3.5 million when they use solar and biomass systems respectively.

Using renewable energy is also part of the company’s line on having sustainable business operations and the need to conserve the environment.

The company is expected to be listed on Bursa Securities in early July this year where its market capitalisation will be RM389.2 million.

From the enlarged number of issued shares, 42.2 million shares (8.1%) are for retail offering, where 25.95 million shares (5%) will be available for the Malaysian public (via balloting) while 50% will be allocated for Bumiputera investors and the other 16.25 million shares (3.1%) will go to eligible persons.

On the other hand, Seng Fong’s institutional offering is at 118.67 million shares (22.9%) where 64.87 million shares will be reserved for private placement to Bumiputera investors approved by the Ministry of International Trade and Industry and 53.8 million shares by way of private placement to other institutional and selected investors.

Its senior manager (development and production) Chong Wah Kiat was positive on the outlook of the rubber market.

Approximately 70% of the global natural rubber is used by tyre manufacturers and the diminishing Covid-19 pandemic would boost the demand of vehicles and tyres.

“We expect the global economy to recover which will likely boost the sales of automobiles and tyres.

“So, in the interest of vehicle producers, plus the replacement of tyres, the demand of tyres is expected to increase,” he said.

Seng Fong non-independent ED Jimmy Er said that their ESG initiative is focusing on their solar power and biomass systems by commissioning and implementing these two systems.

“We’ll definitely put some effort into studying other ESG initiatives that we have, so that we can continually contribute to sustainability,” he said.

Although the global economy is facing geopolitical tensions arising from the Russia-Ukraine War and inflation pressures, Er assures that it has no major impact affecting the company.

“As for the minimum wages set by the government, we are not affected. There’s no material impact on that, because the number of foreign workers who were previously below RM1,500 is not many,” he further added.

For the financial year 2019 (FY19) to FY21, almost all of Seng Fong’s revenue came from international customer sales while the company posted a revenue of RM662.43 million, a gross profit of RM61.74 million and profit after tax of RM31.32 million for its nine months ended March 31, 2022, financial performance.