He said listing SESB would unlock value as the process equipment unit could fetch much better valuation on its own due to its high-growth potential.

"SESB has been growing rapidly. The palm oil industry, which is currently SESB's biggest customer, has great prospects in the long run. Going forward, SESB has plans to diversify further into the oil and gas sector.  

"There would be no change in SESB's management, decision-making process and board structure, as STC and SESB's businesses are not directly related," Wong told The Edge Financial Daily.

STC proposed last week to list SESB through an initial public offering (IPO) of 19.9 million new shares, or 24.91% of its enlarged share capital of 80 million shares of 50 sen each. The proposed exercise is expected to pare down STC's interests in SESB to 65% from 100% currently. The IPO price has yet to be determined.

SESB specialises in the manufacturing of heat exchangers, process equipment and non-pressure tanks for chemical and other industrial storage use. STC itself is mainly involved in manufacturing, design and sales of transformers and lightings, and in industrial engineering design.

STC first bought a 60% stake in SESB in March 2007 for RM14.63 million. It increased the stake to 100% a year later. The acquisition has worked well for SESB, which has seen its fabrication capacity grow to five plants from three previously.

In the first six months of this year, SESB contributed RM4.52 million in net profit, or 35% of STC's group net profit of RM12.9 million, and RM36 million in revenue or 37% of STC's total revenue of RM97.4 million.

On concerns that the performance of the IPO could be affected by market correction, SESB director of finance and administration Penny Wong said the company was monitoring the market and could ask for a six-month extension from the Securities Commission if the sentiment was not conducive.

"We can afford to wait for the listing, as SESB still has sufficient capital to fund its ongoing projects. The response from investors will determine our offer price and the value of the company once approval is obtained," she said.

Although overseas business makes up around 60% of SESB's business, Wong said the company would keep Malaysia as its manufacturing base, as the country offered a strategic location to serve as a low-cost fabrication centre for its European clients.

She also said SESB currently had over RM20 million worth of contracts that would keep it busy until at least the first quarter of next year. It is also bidding for around RM50 million in additional fabrication jobs, mainly from overseas customers.  

SESB's first four factories are running at around 80% capacity, while the fifth plant is running at 30%-40% capacity. It is currently constructing a sixth factory in Rawang, Selangor, to serve the pharmaceutical and food industry. The plant is expected to be ready by next year.