This article first appeared in Capital, The Edge Malaysia Weekly on December 23, 2024 - December 29, 2024

AFTER a record year with 55 companies making their debut on Bursa Malaysia in 2024, Swift Energy Technology Bhd (KL:SET) is gearing up to be the first new listing in 2025.

The industrial automation and power systems manufacturer and distributor is raising a total of RM120.1 million from its IPO. Out of the total, RM70.06 million is expected to be raised via the issuance of 250.2 million new shares at 28 sen apiece.

The proceeds from the issuance will be used mainly for the expansion of a fabrication facility, storage, office and new research and development (R&D) centre (RM28 million); repayment of borrowings (RM15 million); and working capital needs (RM13.35 million).

“This expansion aims to cater for the growing demand for the company’s products and systems, enhancing its capacity to undertake multiple projects or orders concurrently,” says Swift Energy in a statement on Dec 9.

Besides the spending on capacity expansion, repayment of borrowings and working capital needs, about 3.1% of the proceeds will be used for the purchase of machinery, equipment and software, while 2.1% is for a dedicated R&D centre.

The group is also allocating 5.8% of the RM70.06 million proceeds for its expansion into Indonesia through the establishment of a wholly-owned subsidiary and an office in Jakarta.

Established 23 years ago, Swift Energy is involved in the provision of industrial automation and power systems that streamline complex industrial processes, facilitate real-time decision-making processes and enhance operational efficiency.

The group designs, develops and fabricates in-house process control systems for grain products, edible oils and food manufacturing industries, as well as explosion-proof (Ex) rated solar photovoltaic (PV) systems, catering for the oil and gas industry.

Swift Energy is an Ex-certified — mainly IECEx and ATEX — manufacturer of various explosive-rated electrical products and systems for Ex solar PV systems. The group is among six IECEx-certified manufacturers globally.

In Malaysia, Swift Energy is the only IECEx-certified manufacturer for Ex solar PV modules, Ex switch racks, Ex battery chargers, Ex battery enclosures and Ex solar controllers.

IECEx refers to the IEC System for Certification to Standards Relating to Equipment for Use in Explosive Atmospheres issued by the IEC, a global organisation for the preparation and publication of international standards for all electrical, electronic and related technologies.

Meanwhile, ATEX certification is given to equipment that has gone through rigorous testing outlined by European Union directives.

Swift Energy also fabricates and sells Siemens AG’s power distribution systems under the latter’s SIVACON brand, as well as its own “Swift Energy” house brand, for industrial plants and facilities in the grain products, edible oils and food manufacturing plants, as well as utility plants.

Swift Energy exports its products and solutions to 25 countries, on top of the ones in which it has a presence, such as Singapore, China and Thailand.

In the three years to the financial year ended Sept 30, 2023 (FY2023), Swift Energy recorded a compound annual growth rate (CAGR) of 28.3% in revenue, to RM92.43 million. In the nine-month period ended June 30, 2024 (9MFY2024), the group’s revenue stood at RM81.4 million.

Its profitability has also been rising. Profit after tax (PAT) rose from RM3.7 million in FY2021 to RM12.2 million in FY2023. In 9MFY2024, the group made RM11.7 million in PAT, or a net margin of 14.37%, compared with 6.58% in FY2021, 10.02% in FY2022 and 13.2% in FY2023.

PublicInvest Research derived a fair value of 36 sen for Swift Energy, pegging a peers’ weighted average forward price-earnings multiple of 15 times to its FY2025 core earnings per share of 2.3 sen.

“The group’s growth trajectory relies on the continuous growth and increasing investment in the oil and gas industry in Malaysia and Thailand, the global industry 4.0 trend driven by the integration of digital technologies, and the worldwide shift towards sustainable and renewable energy sources,” PublicInvest says in a Dec 19 note.

The industrial automation and power systems segment contributed to 80.7% of Swift Energy’s revenue in 9MFY2024, of which 27.8% came from the Ex solar PV systems, and 25.3% came from the power distribution systems.

PublicInvest says the Ex solar PV systems have grown significantly over the past three years, from revenue of RM7.2 million in FY2021 to RM24.8 million in FY2023. For 9MFY2024, revenue stood at RM22.6 million.

“We have witnessed significant growth in demand for our Ex solar PV systems in the past few years, arising from the global shift towards sustainability and renewable energy in the oil and gas industry,” says Swift Energy CEO Tan Bin Chee. He highlights that food security remains a key factor for countries such as China and, more recently, the African region, where there is high demand for solutions that will enable the countries to strengthen their basic food supply chain.

The Malaysian operation has contributed to more than 60% of Swift Energy’s revenue in 9MFY2024 since FY2021. On the other hand, contribution from Thailand grew to 17.3% of group revenue in 9MFY2024, from a mere 1.6% in FY2021.

Singapore is also a major contributor to the group’s revenue, making up 11.1% of 9MFY2024’s top line, and China accounted for 7.5%.

While Swift Energy has no formal dividend policy, it paid a total of RM2 million in dividends for FY2021, RM4 million in FY2022 and RM11 million in FY2023. The FY2023 dividends made up 92.1% of its net profit.

Swift Energy’s long-term borrowings had increased to RM21.57 million as at June 30, 2024, from RM12.84 million as at Sept 30, 2023. For the same period, its short-term borrowings inched up to RM9.66 million, from RM8.18 million, and its cash and cash equivalents had fallen to RM8.49 million, from RM13.84 million.

Post-IPO, its largest shareholder Blueprint Capital will own 31.61% of the shares, followed by Tan with 27.8%. Tan is also a shareholder of Blueprint Capital, along with Suzana Abu Bakar, who is corporate affairs director of Swift Energy, and Chin Saw Yong. Suzana will have a direct 0.1% stake in Swift Energy. Meanwhile, Chin, the group’s executive director and chief operating officer, will own a direct 10.59% stake in Swift Energy post-IPO.
 

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