This article first appeared in The Edge Malaysia Weekly on December 30, 2019 - January 5, 2020
UWC Bhd’s share price has nearly quadrupled in just over five months, trading on Bursa Malaysia’s Main Market since its debut on July 10.
It is one of the top gainers across the entire Bursa Malaysia in terms of share price and total returns this year. The counter has climbed 282.93% to close at RM3.14 on Dec 26, from its initial public offering price of 82 sen.
Shares of the integrated engineering support services provider outperformed from the first day of listing. UWC’s shares opened at a 34% premium above the offer price, and ended at their intra-day high of RM1.40 — up 71%.
Through the IPO, UWC sold 70 million new shares and 33.01 million existing shares at 82 sen apiece or RM84.47 million. The public portion was 4.98 times oversubscribed and UWC raised some RM57.4 million through the new share issuance.
With an enlarged share base of 366.8 million, the IPO valued the group at RM300.77 million at the time. On Thursday, UWC was valued at RM1.15 billion.
The stellar performance of its share price has garnered UWC the title of the best IPO of 2019, beating 29 others that debuted on Bursa this year.
Hong Leong Investment Bank Bhd served as the principal adviser, underwriter and the placement agent and Wyncorp Advisory Sdn Bhd as its corporate finance adviser.
UWC is principally involved in the fabrication of precision metal sheets and precision machine parts as well as providing value-added assembly services to customers — largely based in Malaysia and Singapore — in the semiconductor and life sciences and medical technology industries.
In the last four years, UWC’s profit after tax (PAT) margin ranged from 16.1% to 25.1% — the highest of which was achieved in the financial year ended July 31, 2019 (FY2019).
Of the RM57.4 million raised, about RM32.12 million or 56% is earmarked for the purchase of new machinery and equipment, RM18 million or 31.3% for repayment of borrowings and RM2.87 million or 5% for working capital.
The equipment, to be acquired in the next three years, will increase UWC’s production capacity by about one-fifth and allow it to automate part of its manufacturing process.
In its prospectus, UWC says its board intends to distribute dividends of at least 20% of its annual PAT to shareholders.
Net profit for FY2019 rose 16.05% to RM36.24 million, or 9.88 sen per share, from RM31.22 million in FY2018, on a higher portion of higher-complexity products sold. Revenue climbed 5.76% to RM144.35 million from RM136.5 million. It paid out dividends of three sen per share for the year.
Among notable IPO mentions of the year is the listing of the country’s largest poultry group, and one of Asean’s largest, Leong Hup International Bhd, on the Main Market on May 16. Maybank Investment Bank Bhd acted as the principal adviser, joint global coordinator, joint book runner, managing underwriter and joint underwriter.
Leong Hup offered for sale 687.5 million existing shares and 250 million new shares at RM1.10 apiece or RM1.03 billion — making it the largest IPO since that of Lotte Chemical Titan Holding Bhd (LCT) in 2017, which raised over RM3.5 billion.
The offer of new shares raised RM275 million, of which 75.5% was earmarked for capital expenditure, mainly to facilitate its regional expansion in Malaysia, Vietnam and the Philippines. Leong Hup also controls Jakarta-listed integrated poultry player PT Malindo Feedmil Tbk.
Although Leong Hup’s public portion was oversubscribed by 3.64 times during IPO, its share price performance has been subdued. Like LCT, its shares were also subject to stabilising efforts.
Those who bought during the IPO would have lost 22.72% or 25 sen per share as at last Thursday, as the counter closed at 85 sen for a market capitalisation of RM3.1 billion.
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