PETALING JAYA: Coraza Integrated Technology Bhd
’s proposed private placement will help fund its growth from 2024, says UOB Kay Hian (UOBKH) Research.
Coraza’s multi-pronged strategy seeks to have a strategic portfolio exposure, aggressive capacity expansion and grow relevance in its customers’ high-margin products.
UOBKH Research said Coraza’s high growth since 2018 has been supported by strategic portfolio exposure, advancement in manufacturing capabilities and capacity expansion.
The company, which provides a wide range of services such as fabrication of sheet metal, precision machining and related services like design and development and value added sub-module assembly services, plans to fund the new strategy through a proposed a private placement of up to 20% of shares to independent third-party investors which could raise about RM70mil at a share price of 81 sen a piece.
The company will also issue up to 10% of its total issued share capital for the implementation as its long-term incentive plan for employees over a five-year period.
Proceeds raised from the placement would be utilised for the purchase of new machinery (RM44.6mil or 64%), repayment of bank borrowings (RM9.9mil or 15%), and working capital (RM14mil or 20%), according to UOBKH Research.
“While there would be near-term dilution to the group’s earnings per share (EPS) upon completion of such exercises, the proceeds raised would allow the group to mainly capture business opportunities in the semiconductor, instrumentation and aerospace engineering industries involving higher-value assembly jobs,” it said.
The research house forecast EPS dilution could be at 20% to its 2023 EPS of 4.4 sen (to 3.5 sen), but the exercise would raise Coraza’s financial year 2023 net cash per share to 19 sen from four sen.
The company has an order book backlog of RM70mil as of end February and is actively expanding its existing portfolio for a more diversified customer exposure to overcome headwinds posed by weaker industry wide slowdown.
UOBKH Research added the company has secured new product introduction projects related to the aerospace, telecommunication and instrumentation industries as part of its proactive growth strategy to cushion shortfalls in the first half of this year.
In terms of portfolio exposure, Coraza is planning to insource some of its finishing parts, mostly from the aerospace market, following the delivery of its new gear in the coming quarters.
Apart from deepening its exposure in the semiconductor and medical/life sciences segments, Coraza is extending its exposure in the semiconductor and medical/life science segments.
