This article first appeared in Capital, The Edge Malaysia Weekly on November 11, 2024 - November 17, 2024

BURSA Malaysia will be a hive of activity this week, with four companies set to make their trading debuts — something that has not been seen in a long time.

On Nov 11, two companies — Mega Fortris Bhd and Azam Jaya Bhd — will share the striking of the gong as they start trading on the Main Market. On Nov 13, Life Water Bhd will make its debut, followed by Metro Healthcare Bhd on Nov 15.

Security seals manufacturer Mega Fortris’ initial public offering (IPO) entails an offering of up to 295.7 million shares, comprising a public issue of 147.9 million new shares and an offer for sale of up to 147.9 million existing shares.

Of the 147.9 million public issue shares, 42.3 million were offered to the Malaysian public, while 25.4 million were offered to eligible employees and persons who had contributed to the success of the company.

Some 38 million shares under the public issue were offered to bumiputera investors approved by the Ministry of Investment, Trade and Industry, while 42.2 million were offered to selected investors by way of private placement. The shares were priced at 67 sen each.

The company said its IPO was oversubscribed by 7.18 times by the Malaysian public, whereby 9,263 applications were received for 345.76 million shares worth RM231.66 million. The bumiputera portion was oversubscribed by 2.58 times.

The company aims to raise RM99.07 million from the issuance of the new shares.

Meanwhile, Azam Jaya’s IPO entails the issuance of 128.8 million shares representing 25.8% of the construction outfit’s enlarged share base, which includes the public issuance of 78.8 million new shares to the Malaysian public, eligible persons and placement to selected investors.

The exercise also involves an offer for sale of 50 million existing shares to selected investors via a private placement. The IPO, priced at 78 sen per share, will see the group raising RM61.46 million from the sale of new shares.

Azam Jaya, principally a Sabah-focused group, has been involved in major construction jobs in the state, building roads, bridges and flyovers, including the Pan Borneo Highway project.

Between the financial year ended Dec 31, 2021 (FY2021) and FY2023, Azam Jaya’s revenue increased by 21.3% to RM280.77 million. In the six months ended June 30, 2024, the group’s revenue stood at RM148.82 million.

Its net profit, however, has trended lower over the years, to RM25.98 million in FY2023 from RM34.14 million in FY2021. In the first six months of this year, Azam Jaya’s net profit stood at RM7.8 million, which was just 30% of what it made in FY2023.

The group intends to use RM28.4 million or 46.21% of the RM61.46 million it raises from the IPO for working capital and RM20 million (32.54%) for repayment of borrowings. It will utilise RM8 million (13%) to enhance its construction capabilities.

Public Investment Bank (Public IB) assigned a fair value of RM1 on Azam Jaya’s shares, based on a 12 times price-earnings (PE) multiple to its FY2025 forecast earnings per share (EPS) of 8.2 sen.

“With RM1.3 billion in unbilled contracts for ongoing Pan Borneo Highway projects, it focuses on road infrastructure but may diversify its project portfolio,” states Public IB in an Oct 24 IPO note.

Another Sabah-based company also making its debut is Life Water, a mineral water and carbonated drinks producer. Life Water’s IPO entails an offering of 125.95 million shares, comprising 97.56 million new shares to the public, to raise RM63.42 million for the company, and an offer for sale of 28.39 million existing shares.

The public portion of the IPO was oversubscribed by 32.19 times, while the bumiputera portion was oversubscribed 22.3 times.

Life Water intends to utilise RM19 million or 29.96% of the IPO proceeds to set up an additional drinking water manufacturing line at Sandakan Sibuga Plant 1; RM12.6 million or 19.87% for the setting up of a second distribution centre in Sandakan; RM12 million or 18.92% for the purchase of a drinking water manufacturing line at Sandakan Sibuga Plant 2; and RM9.61 million or 15.15% to expand its plastic packaging facilities in Kota Kinabalu.

According to Life Water’s prospectus, its revenue has grown between the financial year ended June 30, 2021 (FY2021) and FY2024, to RM166.53 million from RM103.53 million. At the same time, its net profit has also risen to RM28.12 million in FY2024, from RM17.66 million in FY2021. However, its net profit margin has declined slightly, to 16.89% from 17.06%.

The group plans to expand further into Sarawak and Brunei by appointing distributors to leverage their existing networks.

Public IB assigned a fair value of 76 sen per share on Life Water based on a 10 times PE multiple to its calendar year 2025 forecast EPS of 7.6 sen, suggesting an expected return of 16.9% over the IPO price.

“Looking ahead, we project Life Water to achieve a two-year net profit compound annual growth rate (CAGR) of 18.6%, reaching RM39.6 million in FY2026F.

“Our projection is underpinned by the anticipated expansion of drinking water manufacturing capacity by circa 60%, increasing from the current annual capacity of 389 million litres to 627 million litres by 2026,” Public IB says in an Oct 30 IPO note.

Metro Healthcare Bhd, a company listed on the LEAP Market of Bursa Malaysia, will transfer to the ACE Market on Nov 15. The company, which made its LEAP Market debut in 2018, specialises in fertility, obstetrics and gynaecology (O&G) services, including pre-fertility consultations such as pre-pregnancy screening. It currently operates 16 facilities nationwide, comprising three maternity hospitals, six fertility centres, six clinics and a diagnostic imaging centre.

Its IPO entails the issuance of 156.63 million new shares at an offer price of 25 sen each. Of this, 24.47 million shares were offered to the Malaysian public via balloting and 9.79 million to eligible directors, employees and people who have contributed to the group. The remaining 122.36 million shares were earmarked for bumiputera investors via a private placement.

A total of 12,298 applications for 969.08 million issue shares were received from the Malaysian public, representing an overall subscription rate of 38.6 times. The bumiputera portion of the issue shares were oversubscribed by 27.58 times while the remaining public portion was oversubscribed by 49.61 times. 

The group is raising RM39.16 million from the IPO. It plans to use RM25 million or 63.85% of the proceeds to acquire additional maternity hospitals in the Klang Valley and/or other parts of Peninsular Malaysia to expand its O&G business.

It will utilise RM7.33 million, or 18.72%, for its working capital, while RM3 million or 7.66% is allocated for the refurbishment and upgrading of its existing business premises.

In the financial year ended Dec 31, 2023 (FY2023), Metro Healthcare made a net profit of RM6.25 million, which was 24.6% higher than the RM5.02 million of FY2022. In FY2021, net profit was RM9.44 million.

Nevertheless, in the six months ended June 30, 2024, Metro Healthcare chalked up a 24.5% increase in net profit to RM3.54 million, compared with RM2.84 million in the same period a year earlier.

The group has consistently been paying dividends between FY2021 and 1H2024, with its dividend payout ratio ranging from 14.16% in FY2021 to 125.6% in 1H2024. It targets a dividend payout ratio of at least 20% for each financial year.

Malacca Securities has a target price of 27.5 sen on Metro Healthcare, for a potential capital upside of 10%, based on a PE multiple of 28 times.

“We project a three-year earnings CAGR of 16.9%, with core PAT (profit after tax) anticipated to reach RM8.3 million to RM9.9 million over the next three years,” states Malacca Securities in an Oct 30 IPO note.

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