From left: TA Securities Holdings Bhd head of corporate finance Ku Mun Fong, Wentel Engineering Holdings Bhd independent non-executive director Siow Chin How, Wentel Engineering non-independent executive director Wong Chun Wei, Wentel Engineering non-independent and non-executive chairman Ban Kim Wah, Wentel Engineering independent non-executive director Soo Wee Loon and Wentel Engineering independent non-executive director Wong Sze Min (Photo by Sam Fong/The Edge)

KUALA LUMPUR (Jan 15): Wentel Engineering Holdings Bhd is pricing its shares at 26 sen apiece in an ACE Market listing exercise worth RM83 million, comprising RM71.03 million to be raised by the company via an initial public offering (IPO), and an offer for sale of a 4% stake in the company by two shareholders for RM11.96 million.

The valuation gives the metal fabricator a market capitalisation of RM299 million, based on an enlarged share capital of 1.15 billion shares upon listing on Feb 6.

This also values the group at a price-earnings multiple of 14.61 times, based on its profit after tax (PAT) of RM20.48 million and earnings per share of 1.78 sen for the financial year ended Dec 31, 2022 (FY2022).

The IPO comprises a public offering of 273.2 million new shares, or 23.8% of the enlarged share base of 1.15 billion.

Of the shares to be issued for the RM71.03 million fund raising by the company, 57.5 million shares will be made available for application by the Malaysian public, followed by 33 million shares for eligible persons.

A further 38.95 million shares will be allocated through private placement to selected investors and remaining 143.75 million shares will be allocated for Bumiputera investors approved by the Ministry of Investment, Trade and Industry (Miti).

Meanwhile, two existing shareholders also offered to sell 46 million shares, representing 4% of Wentel's enlarged share capital.

The two major shareholders are Wong Kim Fatt, who owns 75% shareholding in the company prior to the IPO, and the group non-independent and non-executive chairman Ban Kim Wah who owns a 18.75% shareholding in the company.

Upon listing, Wong's shareholding will be diluted to 54.23% and Ban will be left with 13.25% stake in the company.

Of the proceeds raised, 56.31% will be used for the construction of two blocks of single-storey factory (with a double-storey office) and two blocks of workers’ hostel.

Meanwhile, 35.24% of the proceeds will be used to purchase new machinery and equipment while the remaining will be for listing related expenses.

Aggressive customer expansion

At a prospectus launch on Monday, Wentel executive director Wong Chun Wei said the group has been involved in the fabrication of semi-finished metal products for 22 years and metal parts for 18 years as an assembler of finished products since 2001.

“Since the inception of our business, we have developed long-term relationships with our customers where some of our major customers have been dealing with us for 10 years or more,” said Wong.

Its major customers are mainly involved in security screening equipment, machining industry and electrical and electronics (E&E), which spans over Malaysia and Singapore markets.

That said, the group is also seeking to aggressively expand its customer base beyond the metal fabrication segment, with Johor Bahru and Singapore, a market close to home with plenty of opportunities, said Wentel group chief executive officer Chuah Chong Syn.

“We actually see in Johor Bahru (Malaysia) as well as Singapore, that there are a lot of opportunities. We targeted [to serve] our existing [customers] and of course we are aggressively looking for new customers. We are looking open for the industry,” said Chuah.

“Outlook for this year, in 2024, we are looking quite positively as we have four industries — security screening equipment, semiconductor manufacturing, computer numerical control (CNC) machine and medical equipment — for now the order is coming, so we're looking at 2024 as a positive increase,” he said.

Wentel’s net profit for the financial year ended Dec 31, 2022 (FY2022) has increased by 49.38% to RM20.48 million from RM13.71 million in FY2021 on the back of higher revenue driven by its customers' orders. Revenue rose 30.81% to RM117.54 million, from RM89.85 million.

Wentel's IPO will be made available starting Monday and will close at 5pm on Jan 22.

TA Securities Holdings Bhd is the principal adviser, sponsor, underwriter and placement agent to Wentel for this listing exercise.