Southern Cable to raise RM71.2m from ACE Market IPO

Southern Cable to raise RM71.2m from ACE Market IPO
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KUALA LUMPUR (Sept 29): Cable and wire manufacturer Southern Cable Group Bhd is aiming to raise RM71.2 million from its initial public offering (IPO) on the ACE Market of Bursa Malaysia.

Southern Cable manufactures cables and wires that are used for power distribution and transmission, communications as well as control and instrumentation applications.

The key supporting activities for the cable and wire manufacturing operations include furnace and casting operations and manufacturing of plastic compounds.

In a statement today in conjunction with its prospectus launch, Southern Cable managing director Tung Eng Hai said the group’s listing on the ACE Market is aimed at elevating Southern Cable’s profile and raise funds to expand production capacity of cables and wires and plastic compound materials to cater for future growth

Southern Cable services various industry sectors, such as power distribution and transmission, telecommunications, building and construction, infrastructure, manufacturing and processing industries, including oil and gas (O&G) processing and petrochemical plants.

Its customers include Tenaga Nasional Berhad (TNB) and Telekom Malaysia Bhd (TM), and it has supplied cables and wires for the Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor and the Mass Rapid Transit (MRT) Sungai Buloh-Kajang Line (MRT 1).

From the total proceeds raised, the group has allocated RM30 million for capital expenditure and expansion.

Of this, RM18.5 million is allocated to purchase and upgrade machinery and equipment, followed by RM7.5 million to construct new factories, and RM4 million to fund the purchase and installation of enterprise resource planning (ERP) information technology systems.

Meanwhile, RM27.5 million will be set aside as working capital, while RM9.2 million will be utilised for repayment of bank borrowings and RM4.5 million to defray estimated listing expenses.

Tung said the construction of two new factories near its current production plants in Kuala Ketil, Kedah will increase the total built-up area from more than 416,000 sq ft to more than 480,000 sq ft.

“Together with the new machines and upgrade in current factory, this will expand our total production capacity by 9,050km of cables and wires to 40,130km of cables and wires per year by the first half of 2022.

“To support the higher production capacity, we are setting up a new polyvinyl chloride (PVC) compound production plant next to our current factory in Sungai Petani, Kedah, [to be completed] by the first half of 2022.

“With this plant, we target to increase our manufacturing capacity of PVC compound material by 4,200 tonnes to 12,000 tonnes per year,” he said.

Tung said these initiatives should strengthen the company's position in the cable and wire sector.

Southern Cable’s IPO entails a public issue of 209.3 million new shares and an offer for sale of 20 million existing shares at an issue price of 34 sen per share.

Out of 209.3 million new shares, 40 million shares are allocated for application by the Malaysian public, followed by 22 million shares for application by eligible directors, employees and persons who have contributed to the success of the group.

Meanwhile, 67.3 million shares under the public issue are allocated for private placement to selected investors, and 80 million shares to identified bumiputera investors approved by the Ministry of International Trade and Industry (MITI).

Some 20 million existing shares will be offered for sale by way of private placement to selected investors.

From the financial year ended Dec 31, 2016 (FY16) to FY19, Southern Cable’s group revenue increased from RM470.7 million to RM656.7 million, reporting a three-year compound annual growth rate (CAGR) of 11.7%.

The group's net profit reported a three-year CAGR of 26.4% from RM14.2 million to RM28.5 million for the same time frame.

Southern Cable intends to implement a dividend policy of distributing a minimum of 15% of its annual net profit to shareholders of the group.

With the prospectus launch, applications for Southern Cable’s IPO will open today and close on Tuesday, Oct 6, at 5pm.

Southern Cable targets to list on the ACE Market on Oct 16.

MIDF Amanah Investment Bank Bhd is the principal adviser, sponsor, sole underwriter and placement agent for the IPO exercise.