KUALA LUMPUR (Oct 16): Cable and wire manufacturer Southern Cable Group Bhd dipped on its trading debut after opening at an initial public offering (IPO) price of 34 sen earlier today.
At the opening bell, Southern Cable shares opened down half a sen or 1.47% at 33.5 sen.
After a lacklustre opening, the stock quickly rebounded and traded as high as 38.5 sen within 15 minutes of trading. At 9.25am, the stock had pared some gains to 36 sen.
Some 203.56 million shares were exchanged, making it the most active stock on Bursa Malaysia this morning.
Speaking at a press conference after the listing ceremony here, the group's managing director Tung Eng Hai said it is targeting to enter the automotive and elevator segments by the second half of 2021 (2H21) through the introduction of a new product range, including power and control cables and wires for automotive and elevator applications.
Currently, the group services various industry sectors, such as power distribution and transmission, telecommunications, building and construction, infrastructure, manufacturing as well as processing industries, including oil and gas processing and petrochemical plants.
For the financial year ended Dec 31, 2019 (FY19), the bulk of the group’s revenue or 76.1% was contributed by power cables and wires, while 5.4% was from communications cables and wires.
The sale of control and instrumentation cables and wires made up 9.4% of revenue, while the remaining 9.1% came from the sale of related products and services.
“As a cable and wire provider with key supporting activities such as furnace and continuous casting as well as manufacturing of plastic compounding for our cable and wire manufacturing operations, we can quickly adapt to market changes and develop new products to extend our reach,” Tung noted.
He said new factories would also allow the firm to expand its annual production capacity of cables and wires as it aims to increase its market share for the manufacture of electric and electronic cables and wires in Malaysia.
“These initiatives would allow us to address growing market opportunities in Malaysia as well as countries where we have already made inroads and underpinned our hope to continue our growth story,” he added.
For FY16 to FY19, the group recorded a three-year revenue compound annual growth rate (CAGR) of 11.7% — from RM470.7 million to RM656.7 million — while the CAGR of its net profit was 26.4%, from RM14.2 million to RM28.5 million, for the same period.
As at Sept 1, the group’s order book stood at RM405.4 million, which included contracts secured from the essential services sector, such as Tenaga Nasional Bhd (TNB) and Telekom Malaysia Bhd (TM).
It expects this to sustain the group’s earnings up to FY22.
Upon its listing today, Southern Cable has raised RM71.2 million in proceeds. The group has allocated RM30 million for capital expenditure and expansion. Of this, RM18.5 million is meant for purchasing and upgrading machinery and equipment, followed by RM7.5 million for constructing new factories, and RM4 million for funding the purchase and installation of an enterprise resource planning (ERP) information technology system.
Another RM27.5 million would be set aside as working capital, while RM9.2 million would be utilised for repayment of bank borrowings, followed by RM4.5 million for defraying estimated listing expenses.