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This article first appeared in The Edge Financial Daily on August 20, 2019

KUALA LUMPUR: Printing and materials converting specialist MTAG Group Bhd, which is en route to be listed on the ACE Market of Bursa Malaysia on Sept 25, is aiming to raise RM72.3 million from its initial public offering (IPO) to fund the next phase of its expansion.

MTAG’s listing is the biggest ACE Market listing this year, according to M&A Securities Sdn Bhd head of corporate finance Gary Ting, following the launch of the group’s prospectus yesterday. M&A is the adviser, sponsor, underwriter and placement agent for the IPO exercise.

MTAG’s IPO entails the issuance of 136.32 million new shares, representing 20% of the Johor-based group’s enlarged share capital, at an issue price of 53 sen a share, together with an offer for sale of 68.16 million existing shares to selected investors, representing 10% of the enlarged share capital at its IPO price.

Of the public issue, the group is aiming to issue 34.08 million new shares to the public and 14.01 million new shares to eligible directors, employees and connected persons, as well as place 68.16 million new shares to Ministry of International Trade-approved bumiputera investors and 20.07 million new shares to third-party investors.

The group plans to use 45.6% or RM33 million of the proceeds raised to buy a 10-acre (4.05ha) land in Johor to build a new manufacturing plant that is much larger than its existing facilities. Its construction will be carried out in two phases, with the first phase comprising a built-up area of approximately 200,000 sq ft. In contrast, its existing facilities’ built-up area is at 83,500 sq ft.

The group will also be using RM13 million or 18% of the proceeds to buy 11 new machines to boost its annual production of labels and stickers to 636.8 million pieces from the 324.5 million pieces now. The remainder of the proceeds will be used to repay bank borrowings (RM10 million) and for working capital (RM12.5 million), besides defraying listing expenses (RM3.8 million).

MTAG managing director (MD) and founder Chaw Kam Shiang said the group also plans to introduce digital press printing in addition to its existing letterpress printing and thermal transfer printing to boost the group’s service offering.

Chaw, together with executive director Philip Lau and chief human resources officer Ang Yam Fung, are the group’s promoters and selling shareholders. Chaw currently holds a direct 63.1% stake, which will be reduced to 50.5% post-listing, while Lau’s 27.1% will be trimmed to 16.7% and Ang’s 8.7% to 2%.

The group is not concerned about choosing to list amid the current market volatility, Lau said when asked about the group’s IPO timing. “For us, whether the market is volatile or not does not really affect us, because we have a growing industry and we want to focus on the expansion of our business,” he said.

Lau said the US-China trade war presents an opportunity as Chinese firms will want to move into Malaysia, while the group expects business from its existing customers, such as Dyson and VS Industry Bhd, to remain stable.

On whether the group will set a dividend policy, Lau said based on its average annual net profit of RM30 million over the past three years, MTAG is looking at a dividend of 20% of its profit after tax.

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