Nestcon to raise RM45.1m from ACE Market listing

Nestcon Group MD Datuk Dr Lim Jee Gin (centre) unveiling the prospectus with Nestcon finance director Lim Joo Seng (third from left) and M&A Securities head of corporate finance Gary Ting (third from right], alongside other key senior Nestcon management officials. (This photo was taken before the full MCO).

KUALA LUMPUR: Building and infrastructure construction services provider, Nestcon Bhd plans to raise about RM45.10mil from its proposed listing on the ACE Market.

In a statement on Tuesday, it said the IPO involves a public issuance of 161 million new shares priced at 28 sen per share, to partly fund its expansion plans.

Of the 161 million new shares, Nestcon said 32.2 million new shares will be offered to the public and another 32.2 million new shares available for the eligible directors, employees and persons who have contributed to the success of its group.

Nestcon said 80.5 million new shares would be placed out to approved Bumiputera investors and 16.1 million new shares placed out to selected investors.

As part of the listing exercise, it is also offering for sale 32.2 million existing shares by way of private placement to selected investors.

The company, which has been in operations since 2010, specialises in building construction as well as civil engineering and infrastructure. It has a portfolio of 29 completed contracts total RM981.60mil.

It has 22 on-going contracts worth RM1.90bil, of which RM1.2bil remains unbilled, representing 4.13 times of its four-year average revenue of RM293.97mil (FY2017 – FY2020).

Nestcon expects the unbilled portion to continue contributing to its financial performance until 2023.

Nestcon group managing director Datuk Dr Lim Jee Gin said while its revenue in FY2020 was marginally affected by the MCO 1.0, its profit performance remained intact with profit after tax and non-controlling interests (PATNCI) margin improving from 3.5% in FY2019 to 4.2% in FY2020.

“Our cash flow from operating activities was also positive as at Dec 31,2020. We believe the results speaks volume of the capabilities of our management team in manoeuvring through tough times, ” he said.

“After a year of muted growth, it is encouraging to witness the upward trajectory of the domestic economic activities and recovery momentum in the construction sector. We are seeing project tenders increasing albeit at a slower pace.

“Our tender sum has grown to about RM2.80bil, with a good balance of tenders from both building and infrastructure segments," he said.

Lim said Nestcon will use part of the proceeds to set up an industrialised building system (IBS) plant and to upgrade its software systems to reduce its dependency on human labour and improve operational efficiency.

“Correspondingly, we intend to acquire more equipment and machinery to strengthen our technical capabilities to take on larger projects, as well as further expand and penetrate into other segments such as renewable energy, ” he added.

Of the RM45.10mil to be raise from the IPO, Nestscon will use RM6mil (13.3%) for setting up the IBS plant, RM6.6mil (14.7%) to purchase machinery and equipment; RM1mil (2.2%) to upgrade its software and systems.

Another RM16.50mil (36.6%) is to repay bank borrowings; RM11mil (24.3%) for working capital; and the remaining RM4mil (8.9%) to defray the estimated listing expenses.

Upon listing on the ACE Market, Nestcon will have a market capitalisation of RM180.27mil. This will be based on the issue price of 28 sen a share and its enlarged issued shares of 643.82 million units.

M&A Securities Sdn Bhd is the adviser, sponsor, underwriter, and placement agent, while Eco Asia Capital Advisory Sdn Bhd is the financial adviser.