From left: Lim Seong Hai Capital Bhd group MD Lim Pak Lian, non-executive chairman Tan Sri Lim Keng Cheng, executive vice chairman Datuk Lim Keng Guan and non-independent MD of machinery, hardware and tools division Lim Keng Hun at the company's IPO prospectus launch. (Photo by Suhaimi Yusuf/The Edge)
KUALA LUMPUR (March 5): TA Securities has valued ACE-Market bound Lim Seong Hai Capital Bhd (KL:LSH) at RM1.27, a 44% jump from its initial public offering price (IPO) of 88 sen per share.
Construction and engineering firm Lim Seong Hai is raising a total of RM168.08 million from the sale of 132 million new shares and an offer for sale of up to 59 million existing shares as part of its listing transfer from the LEAP Market to the ACE Market.
The company is scheduled to list on the ACE Market on March 21, 2025.
TA Securities’ valuation translates to a price-earnings ratio (PER) of 14 times against its earnings per share (EPS) for the calendar year 2025.
At the IPO price of 88 sen per share, Lim Seong Hai is priced at a trailing PER of 11 times against its core EPS in the financial year ended Sept 30, 2024 (FY2024), said TA Securities in a research note on Wednesday.
TA Securities, which has no rating on the stock, stated that the assigned price-to-earnings (PE) multiple is fair, supported by the group's higher return on equity (ROE) and decent net margin compared to similar peers, despite its smaller market capitalisation.
Earnings-wise, TA Securities expects Lim Seong Hai to register a core earnings growth of 8.6% to RM75.9 million for FY2025, from RM69.9 million in FY2024.
This will be followed by an expected 11.7% increase in core earnings to RM84.8 million for FY2026 and projected growth of 26.3% to RM107.1 million in FY2027, it added.
The research house expects earnings growth for Lim Seong Hai to be driven by its strong RM1.5 billion order book, providing visibility up to FY2030.
Additionally, the group’s new job replacement of RM300 million annually over the next three years will further contribute to growth.
TA Securities highlighted that the growth in civil engineering and residential works in 9MCY2024, compared to 2023, reflects Lim Seong Hai's strong track record in construction. This trend supports the company's efforts to expand its order book across construction and related services.
Additionally, the property development division is expected to benefit from the ongoing growth of Malaysia's residential property market, ensuring strong demand for both current and future projects.
TA Securities expects the company, which plans to pay out at least 30% of core net profit to shareholders, to announce a 2.7 sen dividend for FY2025, a three sen dividend for FY2026 and a 3.8 sen dividend for FY2027.
These projections translate to dividend yields of 3.1% (FY2025), 3.4% (FY2026), and 4.4% (FY2027) based on the listing price of 88 sen.
Lim Seong Hai, listed on the LEAP Market since July 2021, distributes building materials, lighting products, and mechanical and electrical items through Lim Seong Hai Lighting Sdn Bhd, and wholesales hardware and tools, as well as rents machinery through Knight Auto Sdn Bhd. The group operates 10 retail stores in Klang Valley and has an online presence.
The company aims to raise RM116.16 million from its public issue, with RM108.86 million earmarked for working capital for construction projects.
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