KUALA LUMPUR (Jan 12): ACE Market-bound HE Group Bhd has priced its shares at 28 sen apiece for its initial public offering (IPO), and will have a market capitalisation of RM123.2 million upon listing, with an enlarged share capital of 440 million.
This values the electrical engineering services provider at a price-earnings multiple of 20 times, based on a profit after tax (PAT) of RM6.17 million and earnings per share of 1.40 sen for the financial year ended Dec 31, 2022 (FY2022). The group is slated to be listed on the ACE Market of Bursa Malaysia on Jan 30.
The IPO comprises the issuance of 86.89 million new shares — constituting 19.75% of the group’s enlarged share capital — of which 53.89 million shares will go towards private placement to selected investors, while 22 million will be made available to the Malaysian public via balloting, and 11 million shares for eligible directors, employees and persons who have contributed to the success of HE Group under pink form allocations.
Additionally, a private placement will be conducted for the offer-for-sale of 44 million existing shares, equivalent to 10% of the group’s enlarged shares.
The group aims to raise about RM24.33 million from the IPO, of which RM15.13 million will be set aside for working capital requirements, followed by RM3.65 million for business expansion to expand end-user industry coverage to include data centres and set up physical offices in Kedah and Johor, RM3.8 million for estimated listing expenses, and the remaining RM1.75 million for capital expenditure.
At a prospectus launch on Friday, HE Group managing director Haw Chee Seng said the group is confident of expanding its end-user industry coverage to include data centres, specifically in Johor, due to the growing presence of artificial intelligence and the Internet of Things.
“Additionally, we aim to expand our in-house capabilities to be an integrated mechanical, electrical and process engineering services provider. By developing expertise in-house, we will improve our cost efficiencies, and position ourselves as a single point of contact, thereby increasing convenience for our customers,” he added.
HE Group, via its subsidiary Hexatech Engineering Sdn Bhd, is principally involved in designing, supplying, installing, testing, and commissioning power distribution systems of various voltage levels (high, medium, low, and extra low).
HE Group has a track record of serving multinational companies in Malaysia, particularly for semiconductors, medical devices and electronic products, which reportedly require high-quality power supply that is reliable and stable.
As at Dec 15, 2023, the group’s order book stood at RM211.9 million, keeping the group busy until the end of 2024.
Its ongoing projects with total contract value of RM423 million involve the provision of power distribution systems, other building system works, and hook-up as well as retrofitting works for end premises.
On the financial front, HE Group recorded a PAT of RM7.26 million on RM138.58 million in revenue for the financial period ended Aug 31, 2023.
The semiconductor sector accounted for 77.2% of HE Group's revenue for the financial period, followed by medical devices (16.1%), and other end-user industries including electrodeposited copper oil, battery cell manufacturing and telecommunications (6.7%).
The group’s PAT jumped to RM6.17 million in FY2022, from RM1.7 million for FY2020, signifying a two-year compound annual growth rate (CAGR) of 90.61%. Revenue climbed to RM107.57 million in FY2022, compared with RM31.39 million for FY2020, representing a two-year CAGR of 85.13%.
Post IPO, the group’s largest shareholder Hexatech Energy Consolidated Sdn Bhd will see its stake diluted to 24.6%. Meanwhile, Haw will hold a 20.42% stake, followed by the group’s executive director Eng Choon Leong with a 14.8% stake.
Applications for the public issue are open from Friday, and will be closed at 5pm on Jan 18.
Alliance Islamic Bank Bhd is the principal adviser, sponsor, sole underwriter and placement agent for the IPO.