KUALA LUMPUR (Aug 23): Family-run SDS Group Bhd is aiming to list on Bursa Malaysia's ACE Market on Oct 7.

At the group's prospectus launch, the Johor-based bakery products manufacturer and distributor said it would be raising RM23.99 million from its initial public offering (IPO) of 23 sen a share.

Some RM6 million or 25% of the IPO proceeds will be used to expand its business presence for both its wholesale and retail channels within the northern and central regions of Peninsular Malaysia, RM7.79 million or 32.5% will be used for working capital requirements, RM7 million or 29.2% to repay bank borrowings and RM3.2 million or 13.3% to defray listing expenses associated with the IPO.

SDS managing director Tan Kim Seng said the group is looking to increase its fleet of lorries for the northern region of Peninsular Malaysia and its Seremban manufacturing plant to support the distribution of its wholesale bakery products.

In addition, the group is also aiming to set up eight new food and beverage (F&B) outlets in the Klang Valley. It currently has 33 F&B outlets — inclusive of five outlets under a licensing agreement — in Johor.

"Our business strategy is to increase our fleet of lorries to expand to the central and northern regions of Peninsular Malaysia. [This] as well as the increase in the number of F&B outlets are expected to provide business growth in terms of revenue increase and earnings," said Kim Seng.

Under the IPO, 104.29 million shares will be issued at 23 sen a share. 20.29 million shares will be made available to the public, 23.13 million shares will be distributed among eligible directors, employees and persons who have contributed to the group's success and 60.87 share are earmarked private placement to third party investors.

Upon listing, the group will have an enlarged share capital of 405.82 million shares, with a tentative market capitalisation of RM93.34 million.

At a press conference after the prospectus launch, M&A Securities Sdn Bhd head of corporate finance Gary Ting said the timing of the group's listing is part of its growth plans.

"The plan to list is really moving along its plan to grow," said Ting.

M&A Securities is the adviser, sponsor, underwriter and placement agent for the IPO exercise.

Kim Seng's son and SDS executive director Tan Kee Jin said of the IPO proceeds earmarked for the group's expansion, RM2 million is for the expansion of its fleet of lorries for its wholesale operations in Penang and Kedah.

According to its prospectus, the third generation family-run company wants to increase the number of one-tonne lorries it maintains to 34 units, from 18 units, while at the same time increase the number of 16-tonne lorries it has for its Seremban plant to eight units, from the current six.

Kee Jin said that in total, the group's fleet comprises some 250 lorries.

Meanwhile RM4 million is earmarked for its retail expansion into the Klang Valley, with the group opening three F&B outlets within the first year from listing and the remaining five in the second year from listing.

"We are in discussions with various parties over where to open the F&B outlets in the Klang Valley. We are still seeing what kinds of outlets they will be as currently, we have bakeries, bakery-cafes and cafes," said Kee Jin.

He added that currently the group has no plans to penetrate foreign markets and it would be focusing on its expansion in the domestic market beyond Johor.

Kee Jin said the group's newly acquired factory in Seremban still has room for production line expansion, but added that the IPO proceeds would not be used to fund a possible expansion of the plant.

SDS acquired the factory in 2016 and finished commissioning the facility in November 2017.

When asked if the group would cross the causeway and set up an F&B outlet in Singapore, Kee Jin said that for the moment the group does not have plans to do so and that it has been exporting its products to Singaporean hypermarkets and supermarkets since 1999.

Furthermore, the group is looking to set up two new depots in Bukit Mertajam, Penang, and Sungai Petani, Kedah, while also targeting to collaborate with food delivery service providers to provide door-step delivery for its products.