This article first appeared in The Edge Financial Daily on October 5, 2018
KUALA LUMPUR: OCC Cables Ltd, which is an indirect subsidiary of Bursa Malaysia-listed OSK Holdings Bhd, expects to raise net proceeds of HK$149 million (RM78.82 million) via its initial public offering (IPO) on the main board of The Stock Exchange of Hong Kong Ltd (HKEx).
OCC Cables’ IPO entails a public issue of 270 million shares, subject to an overallotment option, comprising 27 million public offer shares and 243 million placing shares, at an offer price ranging between 60 Hong Kong cents and 80 Kong Hong cents per offer share. This represents 27% of OCC Cables share base, with OSK Holdings still controlling 73% of the company via its stake in PJ Development Holdings Bhd and OSK Industries Ltd.
The public offer will open at 9am today and close at noon on Oct 11. The allotment results will be announced on Oct 18, and OCC shares are expected to be listed the next day.
OCC manufactures power cable products for power transmission and distribution systems in Malaysia and Vietnam, namely low voltage, medium voltage and fire-resistant power cables. The company is a registered supplier of certain power cable products for Tenaga Nasional Bhd, the largest electric utility company in Peninsular Malaysia.
The group intends to use 53.8% of its IPO proceeds for expansion and enhancement of its existing Melaka plant, 25.1% for a strategic acquisition or investment, 11.1% to replace its existing enterprise resource planning system and the remaining 10% for working capital.
OCC Cables chief executive officer and executive director Yeat Siew Hong shared that the main objective of the group’s IPO was to expand capacity for its Melaka power cable plant, which is currently running at a high utilisation rate.
“Our Melaka factory is near full capacity now, and we intend to expand this to meet the expected increase in the future demand for our power cable products within Malaysia. We also hope to cover the export market more competitively,” he said in an interview.
The group also has a power cable plant in Binh Duong, Vietnam, which is running at about 50% capacity.
Yeat added that there are still significant acquisition or investment opportunities available in the wire and cable market in Malaysia, Vietnam and within the region.
“Among these opportunities, we are focused on quality power cable products or coverage that would enhance or complement our power cable product offerings,” he said.
This would be OCC Cables’s second attempt at a public listing since 2009, when it had attempted to list on Bursa Malaysia.
OCC Cables chairman Ong Ju Yan said the market timing back then was not right for a listing.
“Bursa is a very good exchange to raise capital, but at that point in time the market conditions were not right for a company in our business to get listed here.
“[This time around] when we looked at the various options for fundraising, the Hong Kong market seems to offer the company the best valuation, and that is why we chose HKEx. It is also a very liquid market, and we felt that it was the most suitable choice for us at this point of time,” he said.
OCC Cable’s revenue for the past three years ended Dec 31, 2017 increased from RM196.9 million in 2015 to RM262.1 million in 2017, representing a compound annual growth rate (CAGR) of 15.4%. This was primarily due to an increase in revenue from the sale of low voltage and medium voltage power cables. During the same period, the group’s net profit increased from RM7 million to RM19.8 million, representing a CAGR of 68.5%