KUALA LUMPUR (May 13): Frozen and dried food distributor Guan Huat Seng Holdings Bhd is preparing to list on the ACE Market of Bursa Malaysia to secure funding for its expansion plans, according to its draft prospectus filed with the exchange.

Its initial public offering (IPO) will involve a public issue of 120 million new shares, representing 25.34% of the company's enlarged share base, at a price that is yet to be fixed. Additionally, 21 million existing shares or 4.44% of its enlarged share base will be offered for sale.

It plans to use a significant portion of the proceeds to part-finance the development of a new integrated complex that will house a storage area, product showroom, food processing unit, product development centre and administrative offices, with a total estimated cost of RM23.28 million.

It also plans to use the proceeds to fund the relocation of its manufacturing operations to a new facility in Krubong, Melaka, that is estimated to cost RM11.73 million. The remaining funds will be used for working capital.

Guan Huat Seng has been in the food distribution and retail sector since 1979. Currently, the group distributes food products to resellers and operates a retail outlet in Melaka.

While the company primarily sources its goods externally, it also manufactures flavouring products at its existing facilities in Melaka. After its manufacturing operations are relocated, these existing facilities will be repurposed for storage.

The company's profit after tax (PAT) has been on an upward trend over the past three financial years as revenue grew. In the financial year ended July 31, 2024 (FY2024), PAT was RM6.74 million, up from RM4.35 million in FY2023 and RM4 million in FY2022. Revenue rose to RM84.82 million in FY2024 from RM81.34 million in FY2023 and RM71.22 million in FY2022.

Based on its FY2024 performance, the company's distribution segment was its primary revenue contributor, accounting for 85.09%, while the retail segment contributed 14.91%.

Beyond its IPO-funded expansion plans, Guan Huat Seng wants to broaden its range of both externally sourced and in-house manufactured flavouring products. It also wants to open more retail outlets — one each in Kuala Lumpur, Selangor and the southern region, in either Johor, Melaka or Negeri Sembilan.

Of the public issuance of new shares, it is allocating 23 million shares (5.02% of the enlarged share base) for the Malaysian public, 14 million shares (2.96%) for eligible individuals in the group, 23 million shares (4.86%) for selected investors, and 59.2 million shares (12.5%) for selected Bumiputera investors approved by the Ministry of Investment, Trade and Industry (Miti).

As for the offer for sale, managing director Chan Kim Yeo and executive directors Yeo Tien Ee and Yeo Tian Seng will each offer seven million existing shares, totalling 4.44% of the enlarged share base. Proceeds from this sale will go directly to the three individuals.

Post-IPO, Chan's stake will decrease from 34.65% to 33.18%, while Tien Ee's will drop from 22.93% to 21.46% and Tian Seng's will dip from 17.07% to 15.59%. Based on the company's current share base, Chan Kim Yeo holds a 46.42% stake, followed by Tien Ee's 30.72% and Tian Seng's 22.86%.

TA Securities Holdings Bhd is the principal adviser, sponsor, underwriter, and placement agent for Guan Huat Seng's IPO.