KUALA LUMPUR (June 30): ACE Market-bound third-party ocean freight company KGW Group Bhd is seeking to raise RM16.73 million via its initial public offering (IPO) of 79.66 million new shares at 21 sen apiece.

The new shares represent some 16.5% of KGW's enlarged share capital, according to the information provided at the prospectus launch on Friday (June 30).

Existing shareholders are also conducting an offer for sale of 43.45 million KGW shares or 9% of the group's enlarged share capital, which is expected to raise gross proceeds of RM9.12 million.

Established in 2005, KGW is a non-vessel operating common carrier (NVOCC) that provides end-to-end freight services mainly for Malaysian exports to the US.

An NVOCC is asset-light, as it typically performs all the services of a vessel operating common carrier but does not own the vessels. Some 71.8% of its revenue comes from export services to the US.

KGW also undertakes imports and exports via ocean freight and air freight services to Asia (10.58% of revenue) and Europe (8.8%), and undertakes warehousing as well as distribution of healthcare products and devices in Malaysia.

The IPO, totalling RM25.85 million across 25.5% of the group's enlarged share base, will close in mid-July. KGW is expected to be listed on the ACE Market come August with an indicative market capitalisation of RM101.39 million.

The group recorded a 3.66% growth in profit after tax (PAT) in the year ended Dec 31, 2022 (FY2022) to RM16.34 million from RM15.76 million, as revenue rose 17.54% to RM229.67 million, from RM195.42 million in FY2021.

However, in 1QFY2023, group PAT stood at RM1.28 million, from RM7.56 million, as revenue fell 77% to RM18.04 million, from RM80.97 million in 1QFY2022.

According to KGW, its freight volume has normalised to 14,837 in 2022, from over 17,000 twenty-foot equivalent units (TEU) of containers handled in 2020 and 2021.

KGW managing director Datuk Roger Wong, at a press conference later, however said the group has seen some stabilising in volume and freight rates recently. KGW recorded 3,993 TEU in the first quarter of 2023, up 25% quarter-on-quarter and 14% year-on-year.

The group is also looking at growing further into China, the Middle East and parts of Asia as destination markets, and in the near term put more emphasis on industrial customers and products where volumes “are less affected by economic swings, such as palm oil”.

The group’s gross profit margin typically ranges from 10% to 30% of group revenue regardless of freight rates, he added.

Wong is KGW's largest shareholder, and will hold a 61.05% stake in the company post-listing, followed by executive director Cheok Hui Yen (6.98%), and sales and marketing director Chow Enn Jie (3.96%).

From the IPO proceeds, KGW will utilise RM10 million (59.78%) to repay bank borrowings, RM2 million (11.95%) for renovation of a new operational site in Glenmarie, RM4 million (23.91%) for listing expenses, and RM730,000 (4.36%) for working capital.

The pare-down of borrowings will see it reduce its gearing ratio to 0.23 times, from 0.7 times previously, KGW said.