Initial Public Offering (IPO)

IPO - Siab Holdings Berhad (Part 2) Analysis & MQ Trader Views

MQTrader Jesse
Publish date: Fri, 11 Feb 2022, 03:18 PM
MQTrader Jesse
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Financial Highlights

The following table sets out the financial highlights based on the combined statements of profit or loss and other comprehensive income for FYE 2018 to 2020 and FPE 2021 as well as the historical combined unaudited statements of the Group for the FPE 2020:

 
  • Revenue grows steadily from FYE 2018 to FYE 2020 shows that the company is expanding their business aggressively.
  • The net income also grows in the same extent as the revenue consecutively.
  • The gross profit margin is maintained within the range from 5.50% to 8%. This shows that the cost of this sector is considered high and the company is weak on a price adjustment. (Generally, a GP margin of 20% is deemed high/sound, depending on sectors).
  • The PAT margin reached 4.04% in FYE 2020.
  • Gearing ratio under healthy criteria based on the record 0.37 on FYE 2018, 0.68 on FYE 2019, 0.34 on FYE 2020  (Good gearing ratio should be between 0.25 – 0.5)
 
Comparison between Siab and Selected industry Players in the Construction Industry in Malaysia:
 
 

Business segmentation

 

 

  1. Provision of Building Construction Service (99.88%) 
    1. ​Non-Residential (56.37%) 
      • ​Industrial buildings, purpose-built buildings, hypermarkets, shopping complexes, office buildings, institutional buildings, hotels, and condotels. 
    2. ​Residential (43.51%) 
      • ​SOHO, high-rise condominium, and serviced apartments.
         
  2. Other complementary services (0.12%)
    • To complement the building construction service, they are also capable of providing ICT solutions and services based on clients’ requirements, such as the design and implementation of the wired and wireless enterprise-wide network infrastructure as well as ICT security solutions for their ICT system. 
 

Major Customer and Suppliers

 

 

Customer

The group’s top 5 buyers by total purchases are as follow:-
 
As the construction sector revenue is based on contract order books. The company needs to keep seeking for more contracts to improve their revenue in the future. In this situation, we will be more concerned about the trade receivables amount and trade receivables turnover for Siab Holdings Berhad. As trade receivable amount and trade receivables turnover can reflect whether the customer paid in time. Long overdue payments have a high probability to become bad debt and will cause impairment loss on the financial statement. 
 

Supplier

 
The group’s top 5 suppliers by total purchases are as follows:-
 
The top 5 suppliers already get 66.02% on the purchase value, Siab Holdings Berhad will have the advantage to bargain the price as the volume/value reaches the economic scale. However, if Siab Holdings Berhad wants to switch suppliers it may have high costs on switching suppliers.
 

Order book

The details of the unbilled order book are as follows: 
 
  • Order book of unbilled value with RM 1.04 billion, (Residential - RM   782.3 million, Non-residential - RM 258.6 million
  • According to this information, the order book for this company can only last till FYE 2024, the company must find more contracts to ensure the stability of revenue after FYE 2024.
 

Business strategies and future plans

  1. Purchase of land and construction of storage facilities
  2. Investment to support the expansion plans
    • Expansion into high-rise construction portfolio with higher value and other types of buildings
    • Expansion into civil and engineering segments
  3. Expansion of the technical team

 

MQ Trader Views

Opportunities 

  1. Revenue and net profit grows steadily.
  2. Reasonable PAT margin compared with competitors.
  3. Healthy gearing ratio to avoid the financial issue.

Risk

  1. The price of raw material increase will affect the gross profit margin.
  2. Shortage of foreign workers will affect the process of the project, if higher salaries will increase the cost.
  3. The slowdown in projects due to MCO
  4. The order books only last to FYE 2024.
 

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