KUALA LUMPUR (Sept 6): Die-cutting solutions provider CEKD Bhd aims to raise RM24.28 million from its upcoming initial public offering (IPO) on Bursa Malaysia's ACE market.
From this, a total of RM8.8 million (36.2%) has been allocated for the acquisition of a factory for Hotstar (M) Sdn Bhd — one of CEKD's three wholly-owned subsidiaries at Kepong, Kuala Lumpur.
A further RM3 million (12.4%) of the proceeds will be allocated for the purchase of new machinery and RM1.3 million (5.4%) for the upgrade and development of computer software and server.
The remainder will be used for the repayment of bank borrowings amounting to RM4 million (16.5%), RM1.5 million (6.2%) for marketing activities, RM2.68 million (11%) for general working capital and RM3 million (12.3%) for estimated listing expenses.
The IPO involves the public issue of 50.59 million new shares at the issue price of 48 sen per share.
Of this, 9.73 million new shares will be available for application to the Malaysian public, 9.73 million new shares will be allocated for application by eligible directors, employees and persons who have contributed to the success of the group, 6.81 million new shares by way of private placement to selected investors, and 24.32 million shares by way of private placement to Bumiputera investors approved by the Ministry of International Trade and Industry (MITI).
The market capitalisation upon the successful listing of CEKD, scheduled on Sept 29, 2021, will be RM93.4 million.
Following a virtual prospectus launch today, CEKD managing director Yap Kai Ning said the forthcoming IPO listing of CEKD will not only strengthen the group's presence in the industry as a leading die-cutting solutions provider and manufacturer but also raise its profile to help in its expansion plans.
"The proceeds from the IPO will go towards acquiring laser-cutting machines and automatic steel rule processors to support business expansion and increase our production efficiency. Our production capability will be enhanced with the upgrading of our computer software and servers and this will support business growth.
"This IPO will help us leverage on our integrated business model alongside our three wholly-owned subsidiaries, Sharp Die Cutting Mould Sdn Bhd at Jalan Kelang Lama, Kuala Lumpur; Hotstar; and Focuswin Diecutting Mould Sdn Bhd at Prai, Penang, while allowing us to fortify our presence in the industry as a leading provider and manufacturer of custom die-cutting solutions as well as a trader of related consumables, tools, and accessories," she said.
Looking ahead, Yap believes the demand for die-cutting moulds as well as the related tools, consumables and accessories needed by the manufacturing sector will continue to be strong given the sector’s critical role in the growth of the country’s economy.
CEKD’s die-cutting moulds and tools are used to die-cut paper boxes and cartons, plastic packaging boxes, electrical components such as laptops, hard disks, audio speakers, remote controllers, automotive parts such as engine gaskets, emblems, fabric and leather for furniture, car seats, steering wheels, clothing and shoes.
As at Aug 6, 2021, the group has a large and diverse customer base of 1,309 customers while it achieved an average gross profit margin of 48.3% from FYE 2018 to FYE 2020. CEKD is involved in the manufacturing of die-cutting moulds and trading of related consumables, tools, and accessories, mainly to the paper printing and packaging industry, electronic and electrical industry, and other industries such as automotive, plastic packaging, textile and leather industries.
Meanwhile, M&A Securities managing director of corporate finance Datuk Bill Tan sees a lot more growth opportunities given the number of industries that CEKD can cater to while not relying on any particular industry, mitigating the risk of over-reliance on a particular sector.
"CEKD has leveraged off the industrial growth in Malaysia to expand its business, these industries include paper printing and packaging, the E&E, automotive and textile, just to name a few. These industries will continue to grow and thus so does CEKD’s outlook and sustainability.
"Further, the Covid-19 pandemic has led to a substantial increase in demand for packaging material which CEKD supply to. We see a lot more growth opportunities given the number of industries that CEKD can cater to while not relying on any particular industry, [mitigating] the risk of over-reliance [on a particular sector]," he said.
He added that the IPO shares earmarked for private placement have seen overwhelming demand and the firm is also confident that the public balloting will also be many times oversubscribed.
M&A Securities is CEKD’s adviser, sponsor, sole underwriter and placement agent in relation to the IPO.