This article first appeared in The Edge Financial Daily on December 14, 2017

KUALA LUMPUR: Binasat Communications Bhd, en route to list on the ACE Market of Bursa Malaysia on Jan 8, 2018, is seeking to raise RM39.55 million in its initial public offering (IPO) to finance its expansion.

According to its prospectus, the telecommunication support service provider offers support services for satellite, mobile and fibre optic telecommunication networks.

Binasat said its planned expansion includes setting up a teleport in the Klang Valley and overseas expansion in Laos, Myanmar and Vietnam.

Out of the proceeds raised from the IPO, RM14.36 million will be used to finance the teleport, of which RM10.5 million has been allocated for its construction and the purchase of three acres (1.21ha) to four acres of land.

Owning a teleport, targeted to be completed in two years, is expected to reduce Binasat’s dependency on the teleports of its customers, as well as provide an additional revenue stream.

The enhancement of its operations and maintenance services will amount to RM4.9 million.

Another RM4.8 million of the IPO proceeds will be used to enhance its fibre optic network installation and commissioning service capability, involving setting up  warehouses in Johor.

Meanwhile, RM10.79 million will be used for working capital over a two-year period while RM1.5 million has been allocated for its expansion into Laos, Myanmar and Vietnam.

Binasat managing director Na Boon Aik said it plans to set up new offices in Laos, Myanmar and Vietnam.

“The group’s growth for the next one to two years will be in line with an expected 7% to 8% growth in capital expenditure by major telcos,” Binasat chief operating officer Zulamran Hamat told reporters at Binasat’s prospectus launch yesterday.

While the group has a 48.7% rate of recurring income from its operations and maintenance services, it has no plans to establish a dividend policy yet. The satellite business currently accounts for 50% of Binasat’s total revenue, followed by mobile support services (32%) and fibre optic telecommunication networks (18%).

Binasat’s IPO entails a public issue of 85.98 million new shares and an offer for sale of 40 million existing shares at 46 sen each. This represents a price-earnings ratio of 11.92 times based on earnings per share of 3.86 sen for the financial year ended June 30, 2017.

Binasat’s public issue will raise RM39.55 million for the group. The offer for sale of 40 million existing shares or 15.4% of the enlarged share capital, will see RM18.4 million accrue to offerors Boon Aik, 53, and his brother Na Bon Tiam, 44.

Currently, Boon Aik owns half of the shares in Binasat and Bon Tiam the other half. After the listing, their holdings in the firm will be reduced to a combined 51.6%.