Main Market-bound Seremban Engineering Bhd (SEB) started out in 1979 with a focus on precision machining, chiefly for the automobile industry. In 1991, the company’s current non-independent executive director Wong Choon Cheon shifted SEB’s focus to fabrication.
According to its prospectus, SEB’s current core business is the fabrication of process equipment, metal structures and the provision of maintenance and shutdown services. The company’s growth went up a notch when in 2007 Main Market-listed Success Transformer Corp Bhd (STC) acquired a 60% stake, and subsequently acquired the remaining 40% a year later.

The prospectus says STC believes this is an opportune time for the company to be listed as it will allow the former a better platform for growth and expansion.

“Furthermore, the listed status will enable us to gain better recognition and corporate stature to enhance our corporate reputation, assist in expanding our customer base as well as provide easier access to the capital market for cost effective fundraising,” says SEB.

STC will remain SEB’s major shareholder with a 65% stake post-listing.

As at end-March, SEB’s order book stood at RM13.9 million, and the company is currently tendering for RM50 million worth of contracts both locally and abroad. For FY2009, some 57.2% of its revenue came from overseas markets, namely Singapore, Germany, Japan and Sri Lanka.

According to reports, while the palm oil sector will remain SEB’s main focus, having contributed more than 80% to revenue over the past few years, the company is also looking to diversify into other sectors such as oil and gas, waste management, food processing and pharmaceuticals.
SEB’s recently completed projects include a sludge treatment plant in Singapore and a fabrication project for a local oil refinery.

The company plans to raise RM16.9 million from its listing exercise, of which RM9 million will go to the purchase of machinery and upgrading of its properties, according to its prospectus.

“In 2009, our subsidiary acquired a vacant industrial land in Rawang to facilitate additional fabrication activities. We commenced construction work on this land at the end of 2009 and expect to begin fabrication activities at this new yard by 4Q2010,” says SEB. The new facility is expected to cost the company around RM3.3 million.

From the remaining amount, RM3 million is for the repayment of borrowings, RM2.9 million is for working capital and RM2 million is to defray listing expenses.

Going forward, SEB is banking on its capability as a one-stop metal fabrication provider and its experience serving the palm oil industry as among its growth drivers.

“The recovery in the price of crude palm oil may encourage operators in the palm oil industry to invest in new facilities to process palm oil, including process equipment and metal structure. Hence, the short to medium-term outlook for the sector is likely to be more positive,” says SEB.

However, SEB admits that among the risks it faces is dependence on its major customers Lipico Technologies Pte Ltd and Desmet Ballestra (M) Sdn Bhd that account for over 60% of its revenue.  This means SEB is also suxceptible to any credit risks that its major customers face. The group is also subject to fluctuations in raw material prices as well as cost overruns from its projects.

This article appeared in Capital page of The Edge Malaysia, Issue 805, May 10-16, 2010