(From left) Plytec Holding Bhd independent non-executive directors Goik Kenzu and Anita Chew Cheng Im, non-independent executive director and chief operating officer Louis Tay Chee Siong, independent non-executive chairman Tan Sri Dr Ahmad Tajuddin Ali, non-independent executive director, group managing director and CEO Yang Kian Lock, non-independent executive director and head of engineering Edward Han Liang Kwang, and independent non-executive director Kow Hoay Lee (Photo by Suhaimi Yusuf/The Edge)

KUALA LUMPUR (Nov 15): Newly-listed ACE Market counter Plytec Holding Bhd ended its maiden trading day at an intraday low of 32.5 sen on Wednesday, down 7.14% against its initial public offering (IPO) price of 35 sen, despite opening one sen up on its debut in the morning. The counter's intraday high was 36 sen while its intraday low was 32.5 sen.

Plytec was the fourth worst-performing IPO so far this year, after Radium Development Bhd, which fell 23% from its IPO price of 50 sen, Synergy House Bhd (down 18.6% from its IPO price of 43 sen) and SkyWorld Development Bhd (down 7.5% from its IPO price of 80 sen).

Trading momentum was not with the fourth most active stock on Bursa, which saw 13.04 million shares changing hands at the start of trade, and increasing to 70.8 million shares at the closing bell.

Two research houses, Apex Securities Bhd and Public Invest Research, which have initiated coverage of Plytec, assigned the stock's fair value (FV) at 39 sen, 11.4% higher than the IPO price.

Apex Securities’ valuation is based on a price-earnings (PE) ratio of 12.5 times to projected earnings per share (EPS) of 3.1 sen for the financial year ending Dec 31, 2024 (FY2024). Public Invest, on the other hand, assumes a PE ratio of 15 times for the forecasted EPS of 2.6 sen for FY2024.

Formerly known as Sudut Swasta Group, Plytec is principally involved in the provision of construction engineering solutions and services, and the trading and distribution of core and general building materials for construction projects.

Its construction engineering solutions and services include construction method engineering (CME), digital design and engineering (DDE) solutions and prefabricated construction (PC) solutions that are aimed at increasing the efficiency and safety in construction activities via the adoption of industrialisation practices, supported by digitalisation of the construction processes.

Group aims to expand CME solutions segment

At a press conference after the group’s listing on Wednesday, Plytec group managing director cum chief executive officer Yang Kian Lock said the group hopes to grow the CME segment, which accounted for about 43% of the group’s total revenue of RM158.1 million in FY2022.

“We will invest more on our equipment for [our] renting business, especially for the CME segment. The market trend is expected to change from sales to rental proposition. In 2022, the revenue from sales was around 65%, [while] rental, 35%. For this year, rental will go maybe to 75%, while sales will be only 25%.”

He said the company expects to invest another RM30 million, so that capital expenditure would probably rise to some RM70 million. “We foresee that rental revenue will keep growing, as we are very focused on investing in the equipment. We expect the [rental] revenue to achieve around RM40 million this year,” Yang told reporters.

Meanwhile, the group’s chief operating officer Louis Tay Chee Siong addressed common challenges facing the construction industry, such as project delays and cost overruns, as well as a lack of labour productivity.

“The industry is lacking standardised industrial processes and the use of digital technology. We have to lead by providing centralised resources because the construction industry is facing low labour productivity,” he said.

According to the Malaysia Productivity Corporation, the construction industry’s labour productivity (which is assessed as value added of employment) increased by 5.2% to RM38,575 per person in 2022. This marks an improvement from the previous year, where labour productivity had declined by 4.3% to RM36,669 per person in 2021. Despite this increase, the construction sector continues to trail behind other sectors.

No direct impact from fluctuations in building material prices

Tay said that the group remains unaffected directly by material shortages and price fluctuations, as they are often driven by market forces. The building materials segment contributed about 52% of Plytec’s total revenue in FY2022.

“The challenge is more with the contractors and we are the service provider. There is no direct impact on us. The sudden fluctuations would not normally affect us,” he said.

Plytec raised RM37.1 million from its IPO, of which RM9 million will be allocated to repay bank borrowings, and RM8 million for capital expenditure.

Another RM7.8 million will be utilised for construction of factories and centralised labour quarters on Plytec’s Olak Lempit land, RM6.3 million for working capital, RM4 million for estimated listing expenses and the remaining RM2 million for purchase of software systems and hardware.

The group’s profit after tax (PAT) jumped 50% to RM10.8 million in FY2021, although revenue slipped slightly to RM112.7 million from RM113.18 million a year earlier. In FY2022, its PAT improved by 27% to RM13.7 million, on the back of higher revenue of RM158.1 million.

Post-IPO listing, Plytech’s major shareholders Resilient Capital Holdings Sdn Bhd will own 41.37% of the company from 50.15% previously, while Prestij Usaha Sdn Bhd will hold 32.63% (from 39.55%).

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