Guan Chong keeps options open

  • Business
  • Thursday, 23 Aug 2012

Tay: ‘We had hoped to raise for Guan Chong an amount of between RM80mil and RM100mil.’

PETALING JAYA: Guan Chong Bhd, which aborted its secondary listing exercise in Singapore on valuations issues, is still keeping its options open.

Managing director and chief executive officer Brandon Tay said that the possibility of a secondary listing in the republic had not been closed.

When asked whether a strategic investor was on the cards, Tay, in an email to StarBiz, said:“We have received proposals from strategic investors that want to come in with a significant stake in Guan Chong. Well, funds from them would be good, but we still need to see if they are a right fit to our growth plans.”

The shares and warrants of Guan Chong Bhd continued to slide on the back of its scrapped secondary listing plans, announced last Friday. Many investors were disappointed as to why the listing was aborted so soon especially since it had received the shareholders' approval last month.

Last Friday, Guan Chong said it was not proceeding with its secondary initial public offering (IPO) “for the time being”. In a statement, Tay said that, after much consideration, it wished to reassess its strategic directions with regard to capital requirements for expansion.

Guan Chong shares fell six sen to RM2.95 on volume of 1.93 million shares while the warrants shed four sen to RM1.02 on volume of 238,200 shares.

Guan Chong Bhd shareholders approved the company's plan for a secondary listing in Singapore at an EGM at the end of last month.

With that approval, Guan Chong said that it concluded all the necessary approvals needed from the relevant stakeholders in both Malaysia and Singapore.

On the listing in Singapore, Tay said that it was looking at valuations that were close to what its shares were currently traded on Bursa Malaysia.

“We had hoped to raise for Guan Chong an amount of between RM80mil and RM100mil,” he said.

In the last two years, Guan Chong had invested RM150mil in its Batam facilities, funded mostly by internal funds and some bank borrowings.

An observer close to the deal said the company scrapped the dual listing plan as it could not get the valuations it wanted in Singapore. Furthermore, fund raising was not going as smoothly as planned.

Presently, Guan Chong shares are trading at seven times price earnings ratio (PER) based on its financial year ending Dec 31, 2012 earnings. Consensus estimates is for Guan Chong to deliver earnings per share of 41 sen this year, and 47 sen next year. At 47 sen, it would be trading at a PER of 6.27 times.

A newswire had reported that Guan Chong might scrap its listing in Singapore in favour of selling a stake via corporate exercise. The report had speculated that the listing would be scrapped if a significant stake in Guan Chong was sold to another company prior to the listing.

Guan Chong had then refuted the report and said that its secondary listing remained intact. It added that it had undertaken roadshows to target potential institutional and strategic investors who were interested tin the company.

For the second quarter to June 30, Guan Chong's net profit was up 2.41% to RM35.3mil on the back of a 6.51% decrease in revenue to RM312.84mil. Thus, for the first half period, net profit was up 3.21% to RM66.61mil on the back of a 6.81% increase in revenue to RM667.18mil.

The company is also giving shareholders a third interim tax-exempt dividend of 2.5 sen for the period.

In a statement, Guan Chong said that it was optimistic that its recently-commissioned second production line in Batam, Indonesia, would contribute positively to its financial performance in the second-half, after having witnessed maximum capacity utilisation at both its plants in Pasir Gudang and Batam for the quarter ended June 30.

Guan Chong ground 36,217 tonnes of cocoa beans in the second quarter, slightly more than its installed optimal combined capacity of 35,000 tonnes per quarter at both facilities. The same quarter last year saw Guan Chong grinding only 32,139 tonnes.

The company's bonus issue is on track, and will entail an issuance of up to 159.9 million new shares of 25 sen each. The entitlement date is on Sept 11, while the bonus shares will be listed on Sept 12.

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