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Main Market-bound Seng Fong Holdings aims to raise RM68.1 mln from IPO, expand annual capacity

14/06/2022 12:24 PM

KUALA LUMPUR, June 14 (Bernama) -- Seng Fong Holdings Bhd, a rubber processor producing and trading Standard Malaysia Rubber (SMR) and premium grade block rubber, which is en route to a listing on the Main Market of Bursa Malaysia on July 7, has launched its prospectus for its initial public offering (IPO).

The IPO involves the issuance of 90.8 million new shares and an offer for sale of 70.1 million shares, resulting in a total offering of 160.9 million shares at an IPO price of 75 sen per share.

The whole IPO exercise would raise RM68.1 million, of which RM19.7 million is earmarked for working capital purposes, RM37.9 million for repayment of bank borrowings, RM6.3 million for the installation of biomass systems and the remaining RM4.2 million for listing expenses. 

Upon listing, Seng Fong will have a market capitalisation of RM389.2 million.

"We intend to use part of the proceeds to fund our working capital requirements to expand annual production capacity to 166,000 tonnes by 2023 from the current capacity of 142,000 tonnes.

"To further our environmental, social, and governance (ESG) initiatives, we are also using proceeds to repay bank borrowings that we have used to install two solar systems that will help reduce overall electricity expenses," managing director Er Hock Lai at Seng Fong's virtual prospectus launch today. 

He said the IPO proceeds would also be utilised for the installation of two biomass systems using wood chips and replacement of diesel to reduce overall fuel costs for the company's factories.

It estimated that the use of the solar system would result in savings of RM2.6 million while the biomass system would help the company save RM3.5 million, he said.

On top of the cost saving, Er said the use of renewable energy to reduce electricity and fuel consumption is in line with its emphasis on having sustainable business operations and the need to conserve the environment. 

Meanwhile, he said the export-oriented business has built long-term relationship with its local and international customers and suppliers, including markets such as China, Taiwan and India, who were either tyre manufacturers or international rubber traders.

Majority of its revenue derived directly or indirectly from sales to tyre manufactures. 

For the nine months ended March 31, 2022, Seng Fong posted RM662.43 million of revenue with gross profit of RM61.74 million and profit after tax of RM31.32 million.

For the financial year ended 2021, the group captured an export market share of 11.79 per cent based on its total export of 121,404 tonnes. 

With history tracking back to 1986, Seng Fong has remained profitable throughout the years, including during the Asian Financial Crisis and Global Financial Crisis.

Besides its involvement in the processing of SMR and premium grade block rubber, as well as trading in block rubber, it also operates a Malaysian Rubber Board-approved laboratory for the testing, grading and certification of the processed block rubbers.

Hong Leong Investment Bank is the company's principal adviser, underwriter and placement agent for the listing exercise.

The closing date for the IPO is June 24, 2022.



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