This article first appeared in The Edge Financial Daily on May 23, 2019

KUALA LUMPUR: Volcano Bhd, which is primarily involved in the manufacturing of nameplates and plastic injection moulded parts via its subsidiaries, is seeking to list on the ACE Market of Bursa Malaysia via an initial public offering (IPO) involving 300 million shares.

According to the group’s draft prospectus sighted on Securities Commission Malaysia’s website, its IPO will comprise a public issue of 125 million new shares and an offer for sale of 175 million existing shares, which collectively would represent 36.36% of its enlarged number of issued shares.

Of the IPO shares, 41.25 million will be made available to the public, while another 41.25 million will be allocated to its eligible directors, key senior management personnel, employees and business associates.

In addition, 114.375 million IPO shares will be allotted by private placement to identified investors, while 103.125 million will be for identified Bumiputera investors.

Its managing director Datuk Ch’ng Huat Seng and executive director Gan Yew Thiam have a 25% stake each in Volcano, followed by executive directors Datuk Wong Tze Peng (17.5%) and Yeap Guan Seng (15%).

The four are co-founders of Volcano and promoters in the group’s IPO. The remaining 17.5% stake is held by its chief financial officer and executive director Khoo Boo Wui.

Post-IPO, these substantial shareholders’ stakes will be trimmed from a collective 100% to 63.64%, with Ch’ng having 16.97%, Gan (12.73%), Wong (14.85%), Yeap (6.36%) and Khoo (12.73%).

The group intends to use the IPO proceeds to buy machineries and equipment to expand its business, expand its factory in Rayong, Thailand, and for working capital. The balance will be used to pay for listing expenses.

Volcano, whose products are mainly used in the electrical and electronics and motor vehicle industries, posted a net profit of RM6.95 million on a revenue of RM58.65 million for the financial year ended Dec 31, 2018 (FY18).

In FY17, its net profit was RM8.31 million on a revenue of RM59.66 million, and in FY16, it was RM7.17 million on a revenue of RM62.82 million.

Between FY16 and FY18, an average 3.07% of its revenue was derived locally, while an average of 96.93% was from overseas sales.

TA Securities Holdings Bhd is the principal adviser, sponsor, underwriter and placement agent of the IPO.