KUALA LUMPUR (Oct 7): Northeast Group Bhd (KL:NE) said on Monday that the public portion of its initial public offering (IPO) has been oversubscribed by 73.42 times ahead of listing on the ACE Market.
The precision component manufacturer received 29,702 applications for a total of 2.75 billion shares valued at RM1.38 billion from the Malaysian public, Northeast Group said in a statement. That compares to 37 million shares available for subscription.
Under the public portion, demand from Bumiputera investors totalled over 1.1 billion shares, representing an oversubscription rate of 58.49 times. The non-Bumiputera portion saw applications for 1.65 billion shares, resulting in an oversubscription rate of 88.36 times.
In addition, the 29.6 million shares made available for application by eligible directors, employees, and business associates who have contributed to the group’s success were fully subscribed, according to Northeast Group.
Allotment of shares to successful applicants will take place by Oct 14, and the listing is scheduled for Oct 15.
The 154.2 million shares available for private placement to selected investors and approved Bumiputera investors have been fully placed out.
The company specialises in manufacturing precision engineering components used in industries such as photonics, electrical and electronics, semiconductors, telecommunications, and optoelectronics. It also offers surface finishing, sheet metal fabrication, and mechanical sub-assembly services.
Northeast Group’s IPO consists of a public issue of 168.99 million new shares, which will raise up to RM84.5 million, and an offer for sale of 51.8 million existing shares, expected to raise as much as RM25.9 million.
The listing will offer investors a 29.84% stake in the Penang-based company.
Under the public issuance, 37 million new shares are allocated to the Malaysian public, 29.6 million shares to eligible persons, 61.69 million shares via private placement to selected investors, and 40.7 million shares through private placement to identified Bumiputera investors.
At 50 sen per share, the IPO values Northeast Group at about 20 times its earnings per share of 2.48 sen in FY2023, giving the company a market capitalisation of RM370 million upon its listing.
The company is allocating 47.34% of the gross proceeds from the public issue for the construction of a new factory, which is expected to provide 79,020 sq ft of production floor space and accommodate about 200 computer numerical control (CNC) machines to support production activities.
Northeast Group has also earmarked 23.67% of the proceeds to repay bank borrowings and 14.65% for the purchase of 36 new CNC machines to increase its estimated annual operating capacity, while 7.81% will be allocated for listing expenses and the remaining 6.53% for working capital.
Proceeds from the sale of existing shares, meanwhile, will go entirely to the selling shareholders including managing director Ng Chay Chin and his brother Ng Chai Hee, who is also senior operations director.
Executive director Chong Ewe Hean, senior business and sales director Yin Thien Hee, along with two other shareholders Ng Meng Hang and Tang Ah Lek also put up their existing shares for sale.
Affin Hwang Investment Bank is the IPO’s principal adviser, sponsor, sole placement agent, and sole underwriter.