Company Background

The Company was incorporated in Malaysia under the Act on 20 September 2021 as a private limited company under the name of DS Sigma Holdings Sdn Bhd and was subsequently converted to a public limited company on 17 February 2022. DS Sigma is an investment holding company.

Through the Subsidiaries, the company is principally involved in the manufacturing of corrugated paper packaging products including cartons, protective packaging and paper pallets as well as a supply of non-paper-based protective packaging products such as plastic, foam and rubber products.

The Group’s corporate structure is as follows:

Use of proceeds

1. Expansion of operational facilities - 34.3% (within 24 months)
   1. Expansion of operations to Penang (2.39%)
   2. Establishment of Klang Factory (31.91%)
2. Purchase of new machinery and equipment - 34.18 (within 24 months)
   1. Automated and robotic packing machines (14.16%)
   2. Honeycomb board machines (6.38%)
   3. 6-colour flexographoic printing machines (11.37%)
3. Establish packaging design and innovation centre - 2.27% (within 24 months)
4. Repayment of bank borrowings - 11.96% (within 12 months)
5. Working capital - 10.79% (within 12 months)
6. Estimated listing expenses 8.77% (within 3 months)

Expansion of operational facilities - 34.3% (within 24 months)

(a) Expansion of operations to Penang

The company plans to rent a warehouse cum office with an approximate size of 25,000 sq. ft. in Batu Kawan, Penang. The company has identified several premises for the operations in Penang and intend to commence the rental of the warehouse cum office by 1st half of 2023. The following sets out the estimated cost to set up the Batu Kawan Warehouse:

(b) Establishment of Klang Factory 2

The company intends to allocate RM16.00 million, representing approximately 31.91% of the gross proceeds from the Public Issue to acquire a detached factory with a 2-storey office building with an estimated built-up area of 100,000 sq. ft. by the 1st half of 2024.

The following sets out the estimated cost of factory acquisition, renovation and fittings:

Purchase of new machinery and equipment - 34.18 (within 24 months)

(a) Automated and robotic packing machines

The total estimated cost of the investment in these machines is approximately RM7.10 million which will be fully funded by proceeds from the Public Issue. Details of the estimated costs for these machines are as follows:

(b) Honeycomb board machines

The company plans to introduce a new type of paper pallet using a honeycomb board. To scale up the production of paper pallets, they plan to invest in honeycomb board machines to produce honeycomb boards in various thicknesses which will serve as the pallet’s deck and runner/leg.

(c) 6-colour flexographic printing machine

The company plans to introduce 6-colour printing on the corrugated cartons. As at the LPD, all our flexographic printing machines are equipped with 3 printing units in each machine which is capable of printing up to 3 colours at one time. Our planned 6-colour flexographic printing machine will have 6 printing units which will allow for printing of up to 6 colours at one time. With a wider colour palette, the company would be able to print more vibrant and close-to-true colour images on the corrugated cartons.

Establish packaging design and innovation centre - 2.27% (within 24 months)

The company has renovated an existing area on the ground level of No. 27 Klang Factory and converted the space into a packaging design and innovation centre in September 2022. The packaging design and innovation centre comprise the following areas:

• design area where the company will hire 2 packaging engineers and equip them with computer-aided design software;
• prototyping area comprising computerised digital flatbed cutter to produce corrugated paper packaging prototypes; and
• testing and measurement area comprising various equipment

The company also plans to expand the testing and prototyping facilities by purchasing several testing and prototyping equipment as disclosed in the table below by 1st half of 2023 to facilitate the front-end value-added services

The total estimated costs to establish a packaging design and innovation centre is RM1.50 million as follows:

Repayment of bank borrowings - 11.96% (within 12 months)

Repayment of bank borrowings - 11.96% (within 12 months)The company intends to utilise RM6.00 million of the proceeds from the Public Issue to partially repay the abovementioned facilities. The repayment of the bank borrowings is expected to have a positive financial impact on the Group with interest savings of approximately RM2.05 million based on the prevailing interest rate per annum for each of the banking facilities as stated in the table above. None of the above borrowings were incurred by the Group in the last 12 months.

Working capital - 10.79% (within 12 months)

The company plans to use approximately RM5.41 million of the proceeds from the Public Issue to finance the Group’s day-to-day operational requirements to support the existing business operations as well as the expected growth in the scale of operation in tandem with the expansion of the business. The breakdown of the allocation is as follows:

Estimated listing expenses 8.77% (within 3 months)

The listing expenses are estimated to be RM4.40 million, the details of which are as follows:

Business model

The company business model is depicted in the following diagram:

The company is a packaging products provider with in-house manufacturing of corrugated paper packaging products including cartons, protective packaging and paper pallets. The company also supply non-paper-based protective packaging products such as plastic, foam and rubber products.

The company focus on providing industrial and consumer durable goods packaging. The industrial packaging refers to the packaging of parts and components for the various stages of the manufacturing process. Some of these include metal, plastic, E&E parts and components. Meanwhile, theconsumer durable goods packaging refers to the containment and protection of finished goods, such as television and microwave ovens, for handling, storage and transportation.

The business involves the provision of total and partial packaging including sales of individual packaging items. In total packaging, we sell the packaging products as a complete set, which may comprise a combination of the in-house manufactured products such as corrugated cartons, protective packaging and paper pallets, as well as externally purchased non-paper based protective packaging materials. For

partial packaging, part of the packaging materials is purchased by the customers separately to complement the packaging materials.

The company also provide value-added services for some of the customers including the provision of front-end value-added services such as design support and packaging optimisation, as well as assembly and packing services.

Click here to continue the IPO -DS Sigma Holdings Berhad (Part 2)

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