Company Background

The Company was incorporated in Malaysia under the Act on 25 April 2023 as a private limited company under the name of Solar District Cooling Group Sdn Bhd. On 25 July 2023, the Company was converted into a public limited company and they assumed the present name. The Company is principally an investment holding company. Solar District Cooling Group Berhad together with its subsidiaries (SDCG Group) is mainly involved in the provision and maintenance of building management systems (BMS), solar thermal systems and energy saving services in Malaysia. The principal activities of their subsidiaries, are as follows:

Use of proceeds

1. Expand the Headquarters - 4.21% (within 24 months)

2. Tender bonds and/or performance bonds for future projects  - 11.09% (within 24 months)

3. Purchase of materials for BMS segment, and solar thermal systems and energy saving services segment - 41.47% (within 36 months)

4. General working capital - 28.10% (within 36 months)

5. Capital Expenditure - 5.59% (Within 36 months)

6. Estimated listing expenses - 9.54% (Within 3 months)

Expand the Headquarters - 4.21% (within 24 months)

The group’s current Headquarters is at a 3-storey shop office unit with a built-up area of approximately 8,320 sq. ft., which the group owns in Kajang, Selangor. Their Headquarters is located on a land area of 4,628 sq. ft., of which the building of their Headquarters stands on 2,983 sq. ft. The remaining 1,645 sq. ft. of the land area is currently vacant. 

They have existing workstations to accommodate up to 26 employees, although their current workforce is 53 employees as at the LPD. The employees from project department and technical and servicing department are primarily stationed at their respective project sites for project implementation and/or occupy the shared workstations at the Headquarters. 

Ahead of the business expansion plan to focus on their current core competencies in the provision of BMS and solar thermal systems and energy saving services and addressing opportunities in solar PV systems, they have earmarked RM1.90 million from the proceeds for the expansion of the Headquarters by constructing a new extension on the remaining vacant land, which will increase the built-up area of the existing Headquarters from 8,320 sq. ft. to approximately 14,000 sq. ft.

Tender bonds and/or performance bonds for future projects  - 11.09% (within 24 months)

The group intends to allocate RM5.00 million of the proceeds for tender bonds and/or performance bonds for their future projects. A tender bond is required as part of the tender process and is replaced by a performance bond when the project commences. The projects they may tender or commence after successful bidding process may progress at different stages. A tender bond may be valid for a period of up to 6 to 12 months from the date of tender closing, and performance bonds allocated across various projects until completion which typically last between 1 to 3 years. They anticipate utilising the RM5.00 million within the 24 months following the Listing, as and when needed for either tender bonds and/or performance bonds for various projects. The allocation of the proceeds will improve their liquidity and cash flow position, which would place us in a better position to expand their projects portfolio in the BMS, solar thermal systems and energy saving services segments.

In some cases, the purpose of a tender bond to be submitted along with the tender bid document is to provide a guarantee to the customer that they will undertake the project if they are awarded. The group secures these contracts through the submission of tender bids or private proposals. The tender bond value is set not more than 5.00% depending on the tender. The validity of a tender bond lapses upon the end of the tender period. Generally, in the event they are awarded with the project, the tender bond will be substituted with a performance bond. Conversely, if their bid is not successful, the full amount of the tender bond is refunded. As at the LPD, the Group has provided tender bonds amounting to RM0.04 million in the form of banker’s cheques via internally generated fund as the Group is selective in participating in tenders that require tender bonds. The earmarked proceeds would provide the Group with funding to tender for higher value projects with their existing workforce. 

Purchase of materials for BMS segment, and solar thermal systems and energy saving services segment - 41.47% (within 36 months)

The group has allocated RM18.70 million of the proceeds for purchasing materials for BMS segment and, solar thermal systems and energy saving services segment.

(a) Purchase of materials for BMS segment 

The group intends to allocate RM14.70 million of the proceeds for the purchase of materials for BMS segment. The materials include ICT hardware and software such as DDC, performance sensors and devices, environment sensors, user input devices, and central controllers and related application software. The purchases of materials for BMS segment accounted for 27.04%, 25.07%, 55.25%, 75.64% and 46.67% of the total purchases of materials and services in FY Under Review and FP 2024, respectively. As such, they have earmarked RM14.70 million of the proceeds for the purchase of materials for BMS segment in anticipation of the projects to be awarded to us. 

(b) Purchase of materials for solar thermal systems and energy saving services segment 

The group intends to allocate RM4.00 million of the proceeds for the purchase of materials for solar thermal systems and energy-saving services segment which comprise solar thermal system components, solar thermal system installation materials and other materials. 

Solar thermal system components are mainly for installation of solar thermal hot water systems as part of energy performance services and standalone installation of solar thermal hot water systems. The types of solar thermal system components that they purchased include calorifier tanks, solar and other pumps and STCS controller and sensor components. Whereas, solar thermal system installation materials that they purchase such as power cables and electrical components, as well as other equipment which mainly comprise LED lighting equipment and boiling pan, heat pumps and steam generator. 

General working capital - 28.10% (within 36 months)

The group has allocated RM12.67 million of the proceeds to supplement their working capital over 36 months from the date of the Listing. The general working capital will be utilised for their day-today operations including payments to subcontractors, administration and other operating expenses such as utilities, training expenses, manpower and upkeep of office premises. 

Capital Expenditure - 5.59% (Within 36 months)

The group has allocated RM2.52 million of the proceeds on purchasing new equipment, ICT related systems to enhance productivity and service delivery

(a) Purchasing new equipment for the BMS segment, and installation and maintenance of solar thermal hot water systems segment 

The group currently utilises tools and equipment to carry out their systems integration and maintenance services for BMS segment, and installation and maintenance of solar thermal hot water systems segment. The group plans to purchase the following tools, equipment and vehicles to enhance the productivity and service delivery of these segments, with the estimated cost amounting to RM1.74 million.

(b) Purchasing and subscription for ICT software and services 

The group currently operates their command and control centre at the Headquarters to provide centralised monitoring of connected BMS and solar thermal or hybrid hot water systems, which supports the BMS and solar thermal system and energy saving services segments. They also utilise third-party software to support their BMS and solar thermal system and energy saving services segments, and overall administrative functions. The group intends to expand their command and control centre functionality and ICT resources to support their business growth by purchasing or subscribing to ICT software and services, with the estimated cost amounting to RM0.78 million.

Business Model

The business model during the FY Under Review and FP 2024 is depicted in the following diagram:

They are principally involved in the provision and maintenance of BMS, solar thermal systems and energy saving services. They also provide maintenance services for other systems and equipment.

(i) BMS 

The BMS focus on systems integration of building facilities to provide automation, energy saving services as well as centralising the management of the building facilities such as centralised air conditioning, lighting, elevator, escalator, electrical, communication devices, process utilities, security and building access. Commonly, these are linked to an on-site centralised control room within the building, and in some cases, these facilities are also connected to their command and control centre at the Headquarters in Kajang, Selangor. BMS accounted for 73.94%, 51.47%, 67.88%, 75.53% and 63.78%% of the total revenue for FY 2020, FY 2021, FY 2022, FY 2023 and FP 2024 respectively. 

Within this business segment, the company is involved in the following: 

(a) Systems integration of BMS; and 

(b) Maintenance of BMS 

(ii) Solar thermal systems and energy saving services 

The solar thermal systems and energy saving services focus on solar thermal hot water system, mainly for heavy users of hot water such as hospitals, and in some cases, it includes retrofitting fluorescent lighting to use LED lights as a means to reduce fossil fuels and electricity consumption respectively. The solar thermal hot water system uses sunlight directly to heat water. This segment of their services focuses on helping the customers save on energy which will reduce their carbon footprint of their operations. Solar thermal systems and energy saving services accounted for 19.68%, 45.26%, 29.74%, 21.54% and 23.88% of the total revenue for FY 2020, FY 2021, FY 2022, FY 2023 and FP 2024 respectively. 

The solar thermal systems and energy saving services segment comprises the following: 

(a) Energy performance services; 

(b) Installation of solar thermal hot water systems and solar PV systems; and 

(c) Maintenance of solar thermal hot water and cooling systems. 

(iii) Maintenance of other systems and equipment 

During the FY Under Review and FP 2024, the company also provides maintenance of other systems and equipment comprising gas fired chillers and chilled water system, which accounted for 6.38%, 3.27%, 2.38%, 2.93% and 12.34% of the total revenue for FY 2020, FY 2021, FY 2022, FY 2023 and FP 2024 respectively. 

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