KUALA LUMPUR (April 21): Tyre treading materials manufacturer Eversafe Rubber Bhd kick-started its Ace Market debut today at 46 sen, a 22.2% or 10 sen premium to its initial public offering (IPO) price of 36 sen.
At 9.55am, Eversafe rose 15.28% or 5.5 sen to 41.5 sen with 48.92 million shares done.
Eversafe's issuance of 12.5 million shares for the public was previously oversubscribed by 64.99 times.
Overall, the IPO — totalling 48 million issue shares and 30 million offer shares — had an oversubscription rate of 68.88 times.
The bulk of the IPO proceeds totalling RM17.28 million will be used develop new manufacturing lines with enhanced automation systems (72.8%), defrayment of listing expenses (18.5%) and establish intellectual property (IP) rights and branding initiative, particularly for the overseas market (8.7%).
Exports to 23 countries contributed 60% to its earnings in FY16, while the rest comes from Malaysia, where Eversafe has a 27% market share in the business relating to tyre retreading materials and operations.
Both the IP rights and the introduction of automated manufacturing to its Ipoh plant is to support its overseas expansion, said its chief executive Cheah Siang Tee after its market listing ceremony here today.
"The IP rights pursuance and branding is for our overseas brand name, which is Eversafe. Exported products have a different specification to our Malaysian market.
"Automation helps us reduce manual labour, but it is also for us to comply to the international product standards and specification," said Cheah.
The company is looking to increase its export earnings to 75% in three years, with immediate expansion plans in South America, including a joint venture (JV) to develop a tyre retreading plant there by 2018.
"Just Brazil alone, the market size is 10 times Malaysia's. We intend to slowly enter the market from South America towards North [America]; they both combined have the biggest market in the world in our industry.
"So our plant will tap into that. We will be well funded by our internally generated fund [for the JV]," he added.
Overall, the Malaysia-based international player is hoping to increase its production capacity by 50% in two years with the two major investments.
For FY16, Eversafe recorded a 41.84% year-on-year (y-o-y) increase in net profit to RM8.27 million, on the back of a 0.74% decline in revenue to RM74.74 million.
China was its main revenue contributor in the period at RM10.7 million, followed by Malaysia with RM8.57 million whereas its Japan market contributed RM3.4 million.
Eversafe’s revenue has declined y-o-y for four consecutive years from FY13 to FY16, but profit grew on the back of foreign exchange gains for the company to retain a consistent gross profit margin of over 22%.
Other expansions in the pipeline include a warehouse in the Baltic area which has a port to cater to its operations in Eastern Europe and the UK, said Cheah. Its other notable markets include Australia and New Zealand, he added.