KUALA LUMPUR (Nov 20): Engineering precision parts manufacturer CPE Technology Bhd has priced its shares at RM1.07 apiece for its initial public offering (IPO), which seeks to raise approximately RM179.58 million.

The valuation will give CPE a market capitalisation of RM718.31 million upon listing on Bursa Malaysia’s Main Market on December 7, 2023, based on an enlarged issued share capital of 671.31 million.

The IPO involves the issuance of 167.83 million new ordinary shares in the company or 25% of the enlarged share capital, according to its prospectus filing on Monday.

The IPO will also see the offer for sale of 67.13 million shares or a 10% stake to institutional and selected investors by way of private placement.

CPE is involved in the manufacturing of precision-machined parts and components and provision of computer numerical control machining services. Its main customer industries include semiconductors, life science and medical devices, and sports equipment, with key clients in the US, Singapore and Malaysia, its prospectus showed.

In the financial year ended June 30, 2023 (FY2023), CPE’s net profit slipped 10.67% to RM30.29 million from a record RM33.91 million in FY2022, while revenue rose 4.63% to RM145.28 million from RM138.85 million.

The group saw a compound annual growth rate (CAGR) of 28.49% in profit after tax up until FY2023, compared to RM11.12 million in FY2019. Revenue grew at a CAGR of 16.69% from RM78.35 million in FY2019 to RM145.28 million in FY2023.

Of the IPO proceeds raised, RM69.6 million (38.76%) has been earmarked for the acquisition of new industrial lands and construction of new plants in Johor. CPE said they will comprise a double-storey office building as well as a double-storey factory building, with a built-up area of approximately 118,474 sq ft each.

“This will allow us to optimise our production to cater to the increasing demand, from both local and international customers, for our products and services as well as the feedback gathered from our major customers particularly those from the semiconductor industry. Currently, our unbilled orderbook stands at RM69.27 million,” CPE CEO Lee Chen Yeong told reporters at the prospectus launch.

Meanwhile, a total of 32.9 million (18.31%) of the proceeds will be allocated for machinery and equipment expenses, RM17.5 million (9.72%) for bank borrowing repayment, RM46.9 million (26.12%) to partly finance working capital expenditure, RM1.4 million (0.79%) to partly finance other capital expenditures and the remaining of RM11.3 million (6.3%) for estimated listing expenses.

In addition, the group plans to maintain ample stock of its raw main materials such as stainless steel and aluminium, which are mainly sourced from overseas suppliers such as the US and Japan, Lee said. “Stocking these raw materials on site will help us maintain ample supply while simultaneously mitigating rising shipping costs due to fluctuation in price”.

He noted that the group has seen a 40% to 50% increase in stainless steel prices and a 1.6% to 15% increase in aluminium prices from FY2020 to FY2021, amid higher shipping costs and delays due to Covid-19.

CPE holds a 1.55% share, equivalent to a generated revenue of RM145.35 million, of the total size of the engineering supporting industry (ESI) in Malaysia, worth RM9.37 billion in 2022. The group is looking forward to the forecasted growth of ESI to RM9.98 billion in 2023, spurred by the advancement in technology as well as expansion in end-user markets.

Of the new shares to be issued in the IPO, 33.6 million shares are meant for subscription by the Malaysian public, 83.9 million shares for Bumiputera public investors, and 50.3 million for institutional and selected investors by way of private placement.

CPE’s largest shareholders include group CEO Lee, who will hold a 32.5% stake in the company post-IPO; non-independent non-executive director Foo Ming (19.5%) and executive director Mu Woon Chai (13%).