Details of IPO |
|
Money raised from the IPO: | RM20 mil |
new shares issued: | 80 mil |
Offer price per share | RM0.25 |
Total shares offered | 112 mil |
Market Capital Upon Listing | RM 80 mil |
Enlarged no of shares | 320 mil |
Stock name | KAB |
Principal adviser/sponsor/underwriter | Mercury Securities Sdn Bhd |
Financial Advisor | BDO Capital Consultants Sdn Bhd |
million | % | |
Retail offering | 16 | 14% |
eligible persons | 8 | 7% |
private placement | 88 | 79% |
Total shares offering | 112 |
100% |
comment: the IPO favors institutional investors, considers as long term investors, rather than retailers.With IPO this year is rather sluggish, small offering like this would normally excite retailers, but looking at tiny portion is available to them is rather upsetting
Important dates of the IPO |
|
Open date | 10am 30 oct 2017 |
closing date | 5pm 7 Nov 2017 |
Balloting | 09/11/2017 |
Allotment of shares | 15/11/2017 |
Listing date | 17/11/2017 |
Shareholders Equity b4 IPO | 18,967 |
Shareholders Equity after IPO | 38,967 |
NAPS before IPO | 0.1218 |
NAPS after IPO | 0.1108 |
comment: Dilution effect is caused by the new issuance of shares is priced at above book value per share
Utilisation of proceeds |
RM ' 000 | % |
working capital | 12,100 | 60.5 |
Capital expenditure | 2,200 | 11 |
new branch office | 600 | 3 |
Repayment of debt | 1,600 | 8 |
Listing expense | 3,500 | 17.5 |
20,000 | 100 |
comment: The money raised from the IPO is rather small at only RM20 million. Out of this, more than half of the proceeds would be used to fund working capital since in the construction industry there is a requirement for deposits and bonds before the tender would be given to the successful applicant. But, since the IPO is small, substantial money from the proceeds would be used to cover the listing expense, which in my opinion is too high proportion.
Substantial shareholders control 65% of the company shareholdings |
||||
000 | % | |||
Dato'Lai | Managing Director | 196000 | 61.25% | |
Choong GS | Executive Director | 12000 | 3.75% | |
Feraus bin mahmood | Non Executive Chairman | 100 | 0.03% | |
Lu Chee Leong | Non Executive Director | 100 | 0.03% | |
Tong Siut Moi | Non Executive Director | 100 | 0.03% |
Industry Outlook for M&E Engineering Services |
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SMITH ZANDER projects the M&E engineering services industry to grow further from RM62.5b in 2016 to RM93.8b in 2019, based on awarded project value, at CAGR of 14.5%. Growth in the industry is anticipated to be driven by recovery in construction activities as a result of private investments and government policies to spur growth in the construction sector and socio-economic development. Major government related mega projects namely Tun Razak Exchange, Bukit Bintang Commercial Centre, Kwasa development and Bandar Malaysia development would spur the construction industry in coming years which in turn increase demand for M&E engineering services | |||||||
Selective Financial Figures | |||
2014 | 2015 | 2016 | |
Revenue | 56,954 | 87,098 | 93,124 |
Profit | 3,875 | 4,548 | 6,555 |
GP Margin | 16 | 13.000% | 17.1 |
NP Margin | 6.8 | 5.20% | 7 |
EPS | 1 | 1.42% | 2.05 |
Segmentation of Revenue | 2016 (RM'000) | % |
Electrical | 80,753 | 86.7 |
FTTH | 2822 | 3 |
ELV | 2959 | 3.2 |
Mechanical | 0 | 0 |
93124 | 100 |
Comparison with Peers Listed on Bursa Malaysia |
|||||||||||||
|
FYE |
Market Cap '000 |
Revenue |
NPM |
GPM |
OPM |
NAPS |
D/E |
Cash |
P/BV |
PE(FYE) |
FYE P/S |
EPS (sen) |
Pasukas Berhad |
31-Dec-16 |
125,794 |
62,834 |
-10.40% |
8.5% |
-10.3% |
0.112 |
0.34 |
18,241 |
1.380 |
- 8.07 |
1.249 |
-1.920 |
Kejuruteraan asastera |
31-Dec-16 |
80,000 |
93,124 |
6.50% |
17.1% |
10.9% |
0.122 |
0.33 |
5,295 |
2.053 |
12.20 |
0.859 |
2.050 |
LFE Corporation Bhd |
31-Jul-17 |
47,430 |
13,621 |
-12.47 |
4.6% |
-2.8% |
0.240 |
0.03 |
199 |
1.063 |
27.7 |
3.482 |
-0.091 |
Bintai |
31-Mar-17 |
53,205 |
682,789 |
-2.04% |
8.1% |
-1.4% |
0.230 |
2.65 |
63,071 |
0.804 |
- 4.72 |
0.078 |
-3.920 |
Note: LFE was a PN17 company and uplifted from the status on 6th Jan 2017. Another peer, YFG Berhad is still a PN17 status company and hence is not being compared.
Remaining Order Book |
2017: RM77.96 mil |
2018: RM107.32 mil |
2019: RM31.64 mil |
Among Bursa listed M&E engineering services companies, Bintai is the leader in revenue generation, but due to thin gross margin and high overhead cost the company suffer losses. Meanwhile, KAB is at second place in revenue ranking and together with prudent and effective cost control, KAB is able to generate profit at net profit magin of 7%. Out of all peers listed in Bursa, KAB is the only one making profit for the latest FYE. Outstanding order book is relatively high and would keep the company busy for the rest of the year while there is still room to secure more contract package. KAB is able to generate consistent earning growth for the past few years and still able to keep gearing ratio at managable level. All this factors coupled with bright outlook in M&E engineering services in near future should be enough to place KAB valuation at premium compare to peers. However, the IPO price of RM0.25 per share is equivalent to two time book value and PE ratio of 12 times, which is at premium compare to peers. Hence I would conclude that the offer price is already price in all positive factors the company and the IPO price is at Fair Value.
Disclaimer:
Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The writer does not own or have any intention to buy the abovesaid stock.
Created by Erentitan | Dec 26, 2017
Created by Erentitan | Nov 14, 2017