KUALA LUMPUR (May 14, 2013): Leon Fuat Bhd, enroute to a listing on the Main Market of Bursa Malaysia on June 5, aims to raise up to RM35.6 million in proceeds from its initial public offering (IPO).

Its executive director Calvin Ooi Shang How said of the proceeds, RM13 million will be utilised to repay bank borrowings that was used to purchase a new industrial land with building, opposite its headquarters in Shah Alam, while RM6 million will be utilised for the construction of a new processing plant with warehousing facilities on the newly acquired land.

Another RM6 million will go to the purchase of two new slitting machines to expand the group's facilities to complement its existing range of value-added services in its processing operations. Another RM7.8 million is for working capital and the remaining RM2.8 million for listing expenses.

Leon Fuat will commence the construction of its new processing plant with warehousing facilities by 2015. This new plant, targeted to complete by 2016, will be used to house the two new slitting machines and store steel materials for trading and processing purposes.

For the financial year ended Dec 31, 2012 (FY12), the steel trading and processing company derived 37.21% of its revenue from the trading of steel products and 62.68% from the processing of steel products.

"The processing of steel products can contribute a higher margin so we're looking to increasing the proportion contributed by processing as we have the machines and the two new slitting machines by 2016," Ooi told a press conference after the group's prospectus launch here yesterday.

He said the two new slitting lines will increase the group's products offerings and explore markets that the it had not been able to supply to previously.

The group's gearing level will also improve to 0.67 times post-IPO from the current 0.82 times.

Leon Fuat predominantly serves the Malaysian market, which contributed 98% of its total revenue in FY12, while the remaining 2% is derived from Japan, Singapore and Indonesia.

"The steel market has been competitive but we're positive on the outlook of the steel industry. We believe the future is bright for Leon Fuat once the projects of the regional economic corridors are carried out such as Iskandar Malaysia, the Northern Corridor Economic Region and the Sabah Development Corridor and Sarawak Corridor," said Ooi.

Under its IPO, the group is issuing up to 59.3 million new shares of 50 sen each, of which 15.5 million is available for the public, 10 million for eligible directors and employees and 33.8 million for private placement.

Leon Fuat will also offer for sale up to 31 million of its existing shares for bumiputera investors at an issue price of 60 sen per share.