Mestron eyes RM25.28m from IPO for expansion

This article first appeared in The Edge Financial Daily, on May 24, 2019.

(From left) M&A Securities Sdn Bhd managing director (MD) of corporate finance Datuk Bill Tan, Mestron MD Por Teong Eng, chairman Tajul Arifin Mohd Tahir, Loon and M&A Securities head of corporate finance Gary Ting at Mestron’s prospectus launch yesterday. Photo by Sam Fong

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PETALING JAYA: Steel-pole maker Mestron Holdings Bhd, en route for an ACE Market listing on June 18, announced yesterday it is aiming to raise up to RM25.28 million from its initial public offering (IPO) to support its business expansion for future growth.

The bulk of the proceeds or RM13 million (51.4%) will be used to expand its main manufacturing facility and acquire more machineries and equipment, while RM5.18 million (20.5%) will be used for working capital. Of the remainder, RM4 million (15.8%) will be used to repay bank borrowings, and RM3.1 million (12.3%) will be used to pay off listing expenses.

Its executive director Gary Loon Chin Seng, who is optimistic about the company’s outlook on the back of growth opportunity in the local market, told reporters at the Mestron’s prospectus launch here yesterday that the company is looking to maintain its gross profit margin and profit after tax (PAT) margin at around 30% and 15% respectively, notwithstanding the anticipated manufacturing facility expansion.

Prices of Mestron’s main raw material — steel — has also been stabilising, with a marginal downtrend seen, Loon noted.

For its financial year ended Dec 31, 2018 (FY18), the company’s PAT grew 9.01% to RM9.31 million, from RM8.54 million last year, while revenue climbed 4.83% to RM63.68 million from RM60.75 million.

The manufacturing facility expansion will raise its production floor space from 55,000 sq ft to 96,300 sq ft, and double Mestron’s annual steel pole production capacity from 5,700 tonnes to 11,400 tonnes, Loon said.

The expansion, which is expected to be completed in the next two years, will also enhance Mestron’s manufacturing capability for specialty poles — particularly high mast poles and telecommunication monopoles — that fetch higher margins, Loon added.

As at end-April, Mestron’s order book stood at RM32 million, which will keep the company occupied for the next 12 months, said Loon.

According to Mestron’s prospectus, its IPO entails the issuance of up to 158 million shares at 16 sen per share, of which 39.5 million new shares will be made available to the Malaysian public and 8.75 million new shares to eligible directors and employees. It will also place 30.75 million new shares to selected investors, and 79 million new shares to identified bumiputera investors.