This article first appeared in Capital, The Edge Malaysia Weekly on February 17, 2025 - February 23, 2025

THREE companies are scheduled for listing on the ACE Market of Bursa Malaysia this week — RichTech Digital Bhd (KL:RTECH), TechStore Bhd (KL:TECHSTORE) and ES Sunlogy Bhd (KL:SUNLOGY).

RichTech will debut on Monday, Feb 17. At an initial public offering (IPO) price of 25 sen per share, the electronic reload and bill payment service provider will have a market capitalisation of RM50.61 million at listing, valuing the company at 9.43 times its earnings for its financial year ended Dec 31, 2023 (FY2023).

RichTech began in 2011 as a provider of electronic reloads for mobile airtime and data via an SMS-based reload system and web portal, onlinereload.net, which is now known as the SRS Portal. It has since expanded its services to include utility bill payments, quit rent and assessment payments, and game credit top-ups. It mainly earns revenue by acting as an intermediary for its electronic reload services, with revenue being incentive- or commission-based.

For the company’s incentive-based revenue, a full payment amount is deducted from its credit pool with the payment solution providers, and incentives are provided at the end of the billing cycle. For commission-based revenue, part of the payment is deducted up front, with the remainder deducted from the company’s credit pool.

The IPO raised RM20 million, of which RM13.66 million accrued to RichTech and RM6.33 million to the selling shareholders and promoter. Of the RM13.66 million, RM4.5 million (32.93%) will be used for marketing, promotional and collaboration activities aimed at growing the user base of its digital app, SRS App, and SRS Portal. According to its prospectus, the company intends to invest in marketing activities, using search engine optimisation to increase visibility and traffic to its corporate website as well as its social media platforms. It also plans to spend RM3 million to acquire a new 5,000 to 6,000 sq ft office to consolidate its headquarters and branch office.

Mercury Securities said in its Jan 27 note that RichTech’s business models typically enjoyed high profit before tax margins in the last two years, primarily driven by the significant increase in commission revenue and higher interest income. It expects the margins to moderate slightly in FY2024-FY2026 due to anticipated higher staff costs as the company expands its workforce to support the planned expansion of its business-to-customer segment.

Among its peers on Bursa are Infoline Tech Group Bhd (KL:INFOTEC), Heitech Padu Bhd (KL:HTPADU), Kronologi Asia Bhd (KL:KRONO) and Radiant GlobalTech Bhd (KL:RGTECH).

KAF investment Bank Bhd is the principal adviser, sponsor, underwriter and placement agent for its IPO.

IT services firm TechStore is set for its debut on Tuesday, Feb 18.

Established in 2011 by its managing director Tan Hock Lim and chief technology officer Petr Obsel, along with Abdul Razak Lew Abdullah and Chew Yee Sang, the group mainly provides IT security and automation solutions, including command and control systems, surveillance systems such as closed-circuit televisions and fire alarms, as well as electronic payment and operating systems.

The listing exercise raised RM30 million from the issuance of the 125 million new shares and sale of 25 million existing shares, at 20 sen each.

Of the RM25 million accruing to TechStore, RM11.48 million or 45.9% of the proceeds will be allocated as working capital, RM5 million (20%) to repay bank borrowings, RM2.72 million (10.9%) for recruitment, RM2.3 million (9.2%) for capital expenditure and the rest for listing expenses. Proceeds from the offer-for-sale via private placement amounting to RM5 million will accrue entirely to the sole selling shareholder and executive director Mohd Fadzil Mohd Daud.

At an IPO price of 20 sen per share and enlarged share base of 500 million shares, TechStore will have a market capitalisation of RM100 million upon listing, which values the company at 13 times its FY2023 earnings.

The company has a total order book of RM135.8 million. It caters to Malaysia and Singapore clients in the transport, hospitality, education, logistics and banking industries. It recorded a net profit of RM7.7 million on revenue of RM62.2 million in FY2023.

Malacca Securities highlighted in a Jan 31 note that TechStore is set to benefit from the Johor-Singapore Special Economic Zone (JS-SEZ) initiatives by setting up a branch office in Danga Bay with the aim of seizing business opportunities there.

In its note on Jan 31, TA Securities stated that the company’s key competitive advantages included its diverse range of comprehensive IT security and automation solutions, as well as having a diverse customer base and an experienced management team. As for some key risks related to business and industry, the research house said the continuity of the company’s order book is not assured, as well as its dependence on one major customer — Setia Utama LRT 3 Sdn Bhd — the main turnkey contractor for the Light Rail Transit 3 project. According to its prospectus, Setia Utama contributed an average of 72.53% to TechStore’s revenue from FY2021 to FY2023.

The company’s peers on Bursa Malaysia include Censof Holdings Bhd (KL:CENSOF), Datasonic Group Bhd (KL:DSONIC), HeiTech Padu Bhd and Mesiniaga Bhd (KL:MSNIAGA).

M&A Securities is the adviser, sponsor, underwriter and placement agent for the IPO.

Meanwhile, ES Sunlogy, which specialises in high-tension and low-voltage electrical systems, extra-low-voltage systems, mechanical engineering for building services and solar energy generation through large-scale renewable energy projects, is scheduled for listing on Thursday, Feb 20.

At its issue price of 30 sen per share and enlarged share base of 700 million, the IPO values ES Sunlogy at RM210 million, with a price-earnings ratio of 15 times its trailing earnings. For the financial year ended July 31, 2024 (FY2024), the company reported a profit after tax of RM13.54 million on revenue of RM191.09 million.

The IPO, involving the sale of 140 million new shares and an offer for sale of 70 million existing shares, raised RM63 million. It raised gross proceeds of RM42 million from the public while RM21 million from the offer for sale will go to its selling shareholders, including ES Sunlogy managing director Khor Chuan Meng, executive director Chu Kerd Yee and Datuk Keh Chuan Seng.

Post-IPO, Khor’s stake will be diluted to 21%, while Chu and Keh’s holdings will fall to 28% and 21% respectively.

The company plans to use 33.6% or RM14.1 million of the IPO proceeds for the development and construction of its Selarong Large-Scale Solar photovoltaic plant that can generate up to 29.99mw. Another RM14 million will be allocated to partial repayment of its bank borrowings, RM9.18 million for general working capital requirements and RM720,000 for the acquisition of enterprise resource planning software. The remaining funds will be used to cover its listing expenses.

Its peers on Bursa include HE Group Bhd (KL:HEGROUP), MN Holdings Group (KL:MNHLDG), Kelington Group (KL:KGB), CBH Engineering Holding Bhd (KL:CBHB) and ES Sunlogy Bhd.

In a Feb 5 note, RHB cautioned that the company’s dependence on government policies on renewable energy, slow replenishment of its order book, cost overruns from delayed projects or the inability to complete them, higher-than-expected project costs due to volatile fluctuations in material prices, as well as risk of defects claimed by customers as key risks for its performance.

M&A Securities is the principal adviser, sponsor, sole underwriter and placement agent for the IPO.

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