This article first appeared in The Edge Financial Daily on July 13, 2018

KUALA LUMPUR: Penang-based steel player Tashin Holdings Bhd, a unit of Prestar Resources Bhd, is offering 59.33 million new shares in an initial public offering to fund its expansion into the manufacture of wire mesh products.

It will also offer for sale 55.49 million existing ordinary shares to selected investors, including bumiputeras, en route to a listing on the ACE Market.

Of the 59.33 million IPO shares, which represent 17% of its enlarged share capital, 17.45 million are for public subscription, 8.72 million reserved for eligible directors and employees of the Tashin group and Prestar, 17.45 million for entitled Prestar shareholders, and 15.71 million shares to be privately placed to selected bumiputera investors.

The issue price has yet to be fixed, according to its prospectus exposure, released on the Securities Commission Malaysia (SC) website yesterday. But it envisions proceeds raised would be utilised mainly for land acquisition and the construction of a new factory (45.5%), capital expenditure (20%), general working capital (26.2%) and listing expenses (8.3%).

The land acquisition, Tashin said, is for the construction of a new factory measuring some 90,000 sq ft in total floor space, for its expansion into the manufacture of wire mesh.

The group has identified an industrial land in Seberang Perai, Penang, close to its existing factory for the expansion, projected to have a combined production capacity of 24,000 tonnes per year.

“We see an opportunity to expand into the production of wire mesh due to the increased adoption of it as raw material for building and infrastructure construction, and we intend to leverage our current customer base to market our wire mesh products,” read its prospectus exposure.

“We believe the addition of wire mesh in our product mix will allow us to further improve our profitability and strengthen our customer base, which in turn will enhance our competitive position.”

Besides purchasing new machinery to support the wire mesh business, the group also has plans to expand storage space for raw materials and finished products, and upgrade its existing lines.

Tashin is involved in the manufacturing and trading of steel products, as well as processing of steel coils into slit coils and steel sheets, catering to the automotive, engineering, manufacturing, and construction sectors. The company is owned by Main Market-listed Prestar and Formula Naga Sdn Bhd.

In its financial year ended Dec 31, 2017 (FY17), the group registered a net profit of RM15.72 million, 29% more than in the preceding year. Revenue amounted to RM257.70 million, a fifth more than in FY16.

Prestar is currently trading at about 81.5 sen, valuing the steel maker at RM158 million.