Edelteq debuts on ACE Market, closes up 204% at 73 sen

Saturday 20 Apr 2024

(Left to right): Edelteq Holdings Bhd independent non-executive director Joyce Wong Ai May; Edelteq independent non-executive director Datin Soheir binti Mohammad Khatib; Edelteq executive director and business unit director Khong Chee Seong; Edelteq executive director and group CEO Chin Yong Keong; Edelteq independent non-executive chairman Datuk Johar bin Che Mat; UOB Kay Hian Securities (M) Sdn Bhd CEO David Lim Meng Hoe; Edelteq independent non-executive director Kamaruddin bin Kassim; and Edelteq electronics manufacturing solution business unit director Chin Yuen Fong at the company’s new listing ceremony on the Ace Market of Bursa Malaysia on Wednesday, June 7, 2023. (Photo by Zahid Izzani/The Edge).

KUALA LUMPUR (June 7): Edelteq Holdings Bhd, an engineering support provider for integrated circuit assembly and test processes, made a strong debut on the ACE Market of Bursa Malaysia on Wednesday (June 7), opening at 75 sen, a 51 sen or 212.5% premium from its initial public offering (IPO) price of 24 sen.

At market close, its share price retreated slightly to 73 sen, marking a closing premium of 204.17%.

Edelteq's closing premium was the third highest among the stocks that have debuted on Bursa this year.

As of June 6, Oppstar Bhd had the highest premium at 285.71%, followed by TT Vision Holdings Bhd (276.47%).

Edelteq closed with a trading volume of 104.52 million, and was the third most active counter on Wednesday.

Its market capitalisation stood at RM388.73 million.

Edelteq has a fixed dividend policy of paying out up to 20% of its annual net profit, according to its prospectus.

Edelteq's IPO entails 100 million new shares, representing 18.8% of its enlarged share capital, as well as an offer for sale of 43.2 million existing shares (8.1%) by way of private placement to selected investors.

Its enlarged share capital was 532.5 million shares after the exercise.

The group expects to raise RM24 million from the IPO, in which RM3.7 million has been earmarked for the construction of a new factory in Batu Kawan, Penang, and RM3.4 million for working capital.

Meanwhile, RM3.1 million will be used for research and development activities, followed by RM10.3 million to repay the group’s bank borrowings, and the remaining of RM3.6 million is for its listing expenses.

At a press conference on Wednesday, executive director and group chief executive officer Chin Yong Keong said the new factory will expand its capacity within the next three- to five years after beginning its operations in March 2024.

“We will build the capacity based on the sales and expand accordingly.”

He added that the group is expanding to Europe, while improvising its expansion in the Philippines.

“We are looking into Europe. It is in the discussion stage [and] the product is the same; we just need to establish our presence there.

“We have agents (spread out) in the Philippines, but we may add on more resources and agents to speed up (expansion) in the region,” said Chin.

“For the past two years, we have tried but we have not seen any revenue. We will improvise the strategy in the Philippines.”

Its IPO price was derived from the price-earnings multiple of 23.53 times based on the group’s audited net profit of RM5.44 million or 1.02 sen per share for the financial year ended Dec 31, 2022 (FY2022).

Meanwhile, Hong Leong Investment Bank said it valued Edelteq at a fair value of 47 sen, based on a target price earnings of 16 times of FY2024 forecast of three sen.

It was in line with smaller cap peers’ average forward price earnings (P/E) but represents a 55% discount to ViTrox Corp Bhd of 36 times.

“All in, we are projecting Edelteq’s core net profit to record a strong FY2023-FY2025 compound annual growth rate (CAGR) of 38%.

“This growth is expected to be driven by the commercialisation of its Batu Kawan factory and the burgeoning sales from its dicing blade refurbishment and ATE (automated test equpiment) segments,” said analyst Sam Jun Kit in a research note on Wednesday.

In a May 16 note, TA Securities had ascribed a fair value of 33 sen — 37.5% higher than the IPO price.

Edelteq is primarily involved in the provision of engineering support for integrated circuit (IC) assembly and text processes in the semiconductor industry. It is also involved in the trading of operating supplies, spare parts and tools for IC assembly and testing.

Its customers are multinational integrated device manufacturers and outsourced semiconductor assembly and test companies in Malaysia and overseas, which include Singapore, Thailand, China and the US.

The company made a net profit of RM3 million on a revenue of RM9.8 million for 1QFY2023.

Edelteq, in its prospectus, added that RM6.2 million in revenue or 62% came from the design, development and the assembly of ATE and factory automation.

Additionally, RM2.2 million revenue (22.1%) was contributed by the design and assembly of IC burn-in boards and the supply of printed circuit boards.

The remaining RM1.5 million (14.9%) was from the supply and refurbishment of IC assembly and test consumables.

However, the group’s steady net profit increase in the last four years showed a 73.21% CAGR.

Its net profit has increased in the past financial years. In FY2019, the group reported a net profit of RM600,000, before increasing to RM4 million in FY2022 and RM9 million (FY2021).

It fell to RM5.4 million in FY2022, due to lower revenue from the supply and refurbishment segment of IC assembly and test and consumables.

In terms of revenue, Edelteq saw RM12.4 million in FY2019, then higher to RM16.7 million in FY2020, followed by RM24 million in FY2021 and RM24.4 million in FY2022.

The group noted that the local market brought in RM18.91 million or 77.6% of its total revenue in FY2022. Overseas markets accounted for the remaining 22.4%.

The company’s IPO was initially delayed from May 30 due to Chin being sued by his former employer Mi Technovation Bhd for alleged breach of employment contracts and the abuse of legal process.

On May 20, Edelteq clarified that the dispute was a personal matter between Chin and Mi Technovation, and had nothing to do with the group.

“We are still in the case management stage,” said Chin when asked about that. “We will provide updates to the media.”

Besides being the principal adviser and sponsor, UOB Kay Hian Securities (M) Sdn Bhd is also the underwriter and placement agent for the listing exercise.

Edited ByIsabelle Francis & Lam Jian Wyn

Text Size