This article first appeared in The Edge Financial Daily on February 9, 2018

KUALA LUMPUR: After hitting a sweet spot in 2017, soon-to-be-listed QES Group Bhd remains optimistic about its prospects for 2018 despite foreseeing some uncertainties in the second half.

“I see for the first half of 2018, the [growth] momentum is still there,” said managing director and president Chew Ne Weng at the launch of the initial public offering (IPO) prospectus yesterday. “For the second half, I would say we are still optimistic but cautious.”

QES’ core business is the distribution of inspection, test and measurement equipment, materials and engineering solutions. It also manufactures optical inspection equipment, automated handling equipment and advanced wafer measurement system.

Chew said the group, which plans to raise RM28.82 million from its listing on the ACE Market of Bursa Malaysia on March 8, hit a sweet spot in 2017 as more big multinational clients increased their investments in automated processing equipment.

Going forward, the group intends to develop three key products namely Fully Automated Vision Inspection System, Automatic Wafer Packing System and Automatic Wafer ID, which will form the pillars of growth for QES’ manufacturing division.

QES is also looking into expanding the group’s recurring income segment by implementing a customer relationship management software as well as diversifying the group’s market segments and product line-up.

“For our distribution segment, about 25% to 30% comes from recurring income and it gives us stability,” said Chew.

“We plan to purchase demonstration equipment for the distribution division to increase production and to upgrade the information technology equipment for operational use for our subsidiaries in the Asean region,” he added.

The group also plans to penetrate the higher education, petrochemical and pharmaceutical market segments.

As of Jan 8, QES’ order book stood at RM45.3 million, which could last for about two to four months.

Of the expected proceeds of RM28.82 million from its IPO exercise, QES plans to use RM10.7 million for capital expenditure.

The group will use RM7 million to repay bank borrowings, RM4.9 million to develop three key products within the manufacturing division, RM3.3 million for working capital and RM3 million to defray listing expenses for the IPO.

The IPO entails the issuance of 151.66 million new shares, representing 20% of the group’s enlarged share capital, at an issue price of 19 sen per share.

Based on the enlarged share capital of 758.31 million shares, QES is expected to have a market capitalisation of RM144.08 million.