KUALA LUMPUR (Nov 4): ECA Integrated Solution Bhd aims to raise RM25.5 million via an initial public offering (IPO) exercise to fund working capital requirements and the acquisition of machinery.
The automated manufacturing solutions provider, which is slated to be listed on the ACE Market of Bursa Malaysia on Nov 23, has fixed an issue price of 17 sen per share for the public issue of 150 million new shares, as well as offer for sale of 48 million existing shares by way of private placement to selected investors.
Of the 150 million new shares, 28.9 million shares will be made available to the Malaysian public, 14.4 million shares to eligible directors, employees and persons who have contributed to the group, while the remaining 106.7 million shares will be reserved for selected investors by way of private placement.
From the RM25.5 million ECA Integrated expects to raise from the listing exercise, the company has allocated RM7.7 million for the acquisition of machinery to augment its technical capabilities and cater for higher production output.
“These advanced machines enable greater customisability of [ECA Integrated’s] solutions to better suit customer needs and to handle a larger volume of complex fabrication works,” the company said.
Another RM14 million is earmarked for working capital in preparation for taking on more jobs in future, while the remaining RM3.8 million will be used for repayment of bank borrowings and defraying listing expenses.
ECA Integrated is principally engaged in the provision of integrated production systems (IPS) and stand-alone automated equipment. It also provides after-sales services for technical support services and spare parts.
During the company’s prospectus launch ceremony on Friday (Nov 4), ECA Integrated executive director-cum-chief operating officer Chua Lye Hock said manufacturers worldwide are accelerating the shift towards automation to attain higher production output while simultaneously reducing reliance on manual manpower, which will greatly enhance productivity.
“As an established solution provider in manufacturing process automation, we stand to benefit from this paradigm shift,” he noted.
Chua continued that ECA Integrated, with its customised automation solutions’ proven track record, has built a clientele comprising foreign multinational corporations that are listed on, among others, the New York Stock Exchange, Nasdaq and Frankfurt Stock Exchange.
“Post-listing, beyond expanding our capability and capacity, we are looking into offering smart factory solutions, for which we have already received enquiries from a key customer,” Chua added.
According to ECA Integrated’s prospectus, the company posted a profit after tax (PAT) of RM8.18 million for the financial year ended Oct 31, 2021 (FY2021), higher than FY2020’s RM5.57 million and FY2019’s RM1.37 million. Revenue also grew to RM20.51 million in FY2021, up from RM15.37 million in FY2020 and RM7.67 million in FY2019.
The company boasted a PAT margin of 39.9% in FY2021, higher than 36.2% in FY2020 and 17.8% in FY2019. ECA Integrated also noted that half of the company's revenue for FY2021 was derived from overseas markets, including Eastern Europe, China, Vietnam, the Philippines, as well as the US.
Meanwhile, for the eight-month financial period ended June 30, 2022 (8MFY2022), ECA Integrated logged a PAT of RM4.58 million on a revenue of RM17.82 million — translating to a PAT margin of 25.7%.
Notably, for 8MFY2022, revenue contribution from the US surged to 42.7%, as compared to the 1% it recorded in FY2021.
ECA Integrated said the company intends to target a dividend payout ratio of 20% of its annual net profit to shareholders, after taking into account its results of operation, cash and bank balances, and working capital requirements.
Touching on its high PAT margin, ECA Integrated head of corporate strategy and communication Sean Phang explained that the company provides its customers with highly custom-built solutions, which are valued as they allow for increased production yield.
“Our automation manufacturing line is highly custom-built. Our customers are facing a lot of problems in terms of yield, so they want to increase their profit by having a very advanced manufacturing line [to improve their yield]. Our machines are highly customised, so our customers highly value us,” he said.
Additionally, Phang noted that the company enjoys tax exemption benefits from the Ministry of International Trade and Industry, which also contributes towards its PAT margin.
However, Phang said that moving forward, the company’s margin may decline by “a few percent” as it gears towards more growth, but assured that it will remain elevated.
Phang also assured that ECA Integrated will be able to weather through the global economic downturn which is expected to occur in 2023.
He said that the industries the company provides its automated services to — manufacturers of semiconductors, electronic vehicles and automotive electronic components, solar system components, and 5G telecommunication equipment components — will continue to see demand even in a recession.
“As for the geopolitical aspect, it favours us in the sense that de-globalisation leads to a global shortage of labour, as countries need foreign labour.
"Therefore, it pushes further investment into automation, in order to have consistent output,” he said, noting that the company will remain resilient.