KUALA LUMPUR (Feb 18): Integrated building materials provider Chin Hin Group Bhd, en route to list on the Main Market of Bursa Malaysia on March 8, expects the expansion of its manufacturing capacity to drive earnings growth this year, said managing director Chiau Haw Choon.

He said the company plans to use RM15 million raised from the initial public offering (IPO) to expand its production capacities of its precast concrete products and its Starken AAC (autoclaved aerated concrete) products, which are expected to be completed by end-2016.

“Our manufacturing plants are currently running at almost full capacity. We believe the construction sector will remain robust with several large construction contracts keeping job flows in 2016," he told reporters after the launch of the IPO prospectus today.

"As such, we think the capacity expansion is timely and will ready us for the booming construction jobs in the coming years,” he said.

“Having reviewed and analysed various options, we decided on a vertically integrated business model through the manufacturing of building material products which are less labour intensive and could command higher margins, compared to distribution of third party products,” said Chiau.

“In this regard, we decided to manufacture our own precast concrete and AAC products.

"This is because AAC products have growth potential as a substitute for cement and clay bricks, while manufacturing our precast concrete products will allow us to penetrate into the infrastructure sector,” he added.

Of the total proceeds of RM41.08 million raised from the IPO, RM15 million will be used for expansion of existing manufacturing facility and purchase of new equipment and machineries, RM15 million to repay borrowings, RM7.1 million for working capital and RM4 million for listing expenses.

The IPO exercise entails a public issue of 63.2 million new shares and an offer for sale of 65 million existing shares at an issue price of 65 sen per share.