KUALA LUMPUR (March 29): Oil palm plantation player MKH Oil Palm (East Kalimantan) Bhd began taking orders from investors on Friday for its initial public offering (IPO) on the Main Market that would raise up to RM155.43 million.

The IPO, which is priced at 62 sen apiece, comprises a public issuance of 220 million new ordinary shares, which represents 21.5% of the enlarged share capital, as well as an offer for sale of 30.7 million existing shares, which represents 3% of the enlarged share capital, by way of private placement to selected investors.

MKH Oil Palm is an upstream oil palm plantation group based in East Kalimantan, Indonesia. It is principally involved in the cultivation of oil palm, and the production and sale of crude palm oil and palm kernel. It currently owns two oil palm plantation estates with a total land area of 18,205 hectares.

Out of the 220 million new shares, the company allocated 51.21 million shares to the public, while 168.79 million shares are reserved for private placement to select investors.

Applications for the IPO will be closed on April 16, while the listing is set for April 30. With an enlarged share capital of 1.02 billion shares, the group will have a market capitalisation of RM634.6 million upon listing.

The company sees a price-earnings ratio of 20.3 times, based on its net profit of RM30.4 million for the financial year ended Sept 30, 2023 (FY2023).

This represents a decline of 45.2% from the net profit of RM55.5 million in FY2022, due to the rising operating costs amid an increase in operational activities, driven by more favourable weather conditions.

Annual revenue was up 7% to RM337.98 million in FY2023 from RM315.82 million in FY2022, contributed 100% by sales derived in Indonesia.

The new share sale is expected to gross RM136.4 million. According to its statement on Friday in conjunction with its IPO prospectus launch, the company said it plans to use RM42 million or 30.8% of the proceeds raised from the new share sale to acquire land for oil palm plantation within the East Kalimantan province, while RM9 million or 6.6% would be used to set up a palm kernel crushing facility to provide the group with an additional income stream.

Meanwhile, another RM42 million or 30.8% of the total proceeds will be used for capital expenditures for existing plantation lands, the upkeep of the existing palm oil mill, the refurbishment of staff housing quarters, and the expansion of the electricity supply.

The group will also allocate RM30 million or 22% of the proceeds for loan repayments, and the remaining RM13.4 million or 9.8% for working capital and listing expenses.

M&A Securities is the adviser, underwriter and placement agent for the IPO. Kenanga Investment Bank is the joint writer and joint placement agent, while AmInvestment Bank is also the joint placement agent.

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