KUALA LUMPUR (Aug 1): Freight services provider KGW Group Bhd made its debut on the ACE Market of Bursa Malaysia on Tuesday (Aug 1) at 23 sen, or a premium of 9.52% over its initial price offering (IPO) price of 21 sen.

Its share price rose to an intraday high of 25 sen before closing at 23 sen.

KGW was the most active counter on Bursa Malaysia, as its trading volume amounted to 180.39 million shares at market close.

Established in 2005, KGW is a non-vessel operating common carrier (NVOCC) that provides end-to-end freight services mainly for Malaysian exports to the US.

An NVOCC is asset-light, as it typically performs all the services of a vessel operating a common carrier but does not own the vessels. Some 71.8% of KGW's revenue comes from export services to the US.

Through its subsidiaries, it is principally involved in the provision of logistics services, including ocean freight services, air freight services and freight forwarding services, as well as warehousing and distribution of healthcare-related products and devices.

KGW also undertakes imports and exports via ocean freight and air freight services to Asia, which account for 10.58% of its revenue, and Europe (8.8%).

At 23 sen per share and its enlarged share capital of 482.8 million shares, KGW has a market capitalisation of RM111.04 million.

It is currently trading at 6.94 times of its price-earnings (P/E) based on its audited combined profit after tax (PAT) of approximately RM16.34 million for the year ended Dec 31, 2022 (FY2022).

KGW’s IPO had comprised a public issue of 79.66 million new shares, including 24.14 million shares available to the Malaysian public, and 9.65 million shares for eligible directors, employees and persons.

Its private placements involved 7.24 million shares by way of private placement to selected investors and 38.62 million shares to Bumiputera investors.

KGW raised RM16.73 million from its IPO, with 59.78% or RM10 million of the proceeds earmarked to repay bank borrowings, while 11.95% (RM2 million) was for the renovation of a new operational site in Glenmarie.

Other utilisation of its proceeds include 23.91% (RM4 million) allocated for listing expenses, and 4.36% (RM730,000) for working capital.

Two research houses were upbeat on KGW’s future prospects, with RHB Investment Bank having assigned its shares a fair value (FV) of 23 sen, a 9% premium over its IPO price, representing a P/E multiple of 12.2 times its financial year ending Dec 31, 2024 earnings.

Meanwhile, Public Investment Bank Bhd assigned a slightly higher FV of 24 sen, based on an eight times P/E multiple to its FY2024 earnings per share of three sen.

Based on the group’s prospectus, KGW is also looking into breaking into China, the Middle East and parts of Asia as destination markets, and in the near term, put more emphasis on industrial customers and products where volumes are less affected by economic swings, such as palm oil.

In terms of finances, KGW recorded a 3.66% growth in PAT in FY2022 to RM16.34 million, from RM15.76 million, as revenue rose 17.54% to RM229.67 million, from RM195.42 million in FY2021.

However, in 1QFY2023, group PAT stood at RM1.28 million, from RM7.56 million, as revenue fell 77% to RM18.04 million, from RM80.97 million in 1QFY2022.

TA Securities Holdings Bhd was the principal adviser, sponsor, underwriter and placement agent for the IPO.

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