KUALA LUMPUR: CHIN HIN GROUP is targeting to grow its manufacturing division substantially in 2016.
The integrated building materials firm, which will launch its initial public offering (IPO) prospectus today for listing on the Main Board of Bursa Malaysia, has allocated RM15mil to expand its manufacturing business from the RM41 million it intends to raise from the IPO.
Executive director and chief financial officer Lee Hai Peng told StarBiz that of the RM15mil allocation, RM5mil would be used to expand the group’s precast concrete facility in Bukit Serendah, Selangor, and RM10mil for its autoclaved aerated concrete (AAC) facility nearby.
The investments would increase the production capacities to 67,500 tonnes per annum and 600,000 cubic metres, respectively. Both expansions are expected to be completed by the end of 2016.
The balance of the RM41mil proceeds would be used to buy new equipment, repay bank borrowings, fund working capital as well as for listing expenses.
The IPO entails a public issue and offer for sale of 63.2 million new shares and 65 million existing shares at 65 sen apiece.
A total 25.3 million shares will be available to the Malaysian public, 6.4 million for application by the company’s eligible directors and employees, while 50.59 million would be open to bumiputra investors approved by the International Trade and Industry Ministry.
The remaining 45.91 million shares are for private placement.
With an issue price of 65 sen per share and the enlarged issued and paid-up share capital of 505,888,000 ordinary shares, Chin Hin will have a market capitalisation of RM328.83mil.
“Our Starken AAC business produces a substitute product for clay bricks that is easier to install and can bring about cost savings of up to 25%,” its group managing director Chiau Haw Choon said.
“It has yet to contribute to group profit so we’ve decided to focus on it this year.”
Currently, Chin Hin’s manufacturing segment had an orderbook of RM170mil.
“We had made a loss of RM5mil in our Starken AAC business in 2014 as we only started production that year. Since we made a profit of RM1mil in 2015, we consider that a feat as not many factories can breakeven within three years.
“As such, we are expecting to chart a strong growth in this division this year.”
“Having achieved what we did on just a capacity of 375,000m3, or just 80% of what we can do, it is possible to fare better this year,” Lee added.
Currently, the 75% family-owned conglomerate had 10 branches countrywide, with five warehouses in the peninsular .
“The IPO gives us access to the capital market as after 40 years in the business, we need a platform to go to the next level,” Lee said.
“In spite of the challenging economy, we trust that our company’s fundamentals would carry us through the exercise. Furthermore, the RM41mil that we are raising is very achievable. Upon listing, gearing will be about 1.3 times,” Chiau said.
As of Aug 31, 2015, group revenue stood at RM800mil.
“Our profit after tax for the period came in at RM20mil, compared with the previous year’s RM16mil,” Lee said.
He said although infrastructure projects were not that significant in the group’s pipeline, its orderbook of RM170mil would be able to sustain the business for the next three years.
Meanwhile, Chin Hin was also looking to increase export sales within the next few years. “We are running at full capacity supplying mainly to Singapore and the Philippines, as well as Taiwan and Australia,” Chiaw said.
The company was eyeing expansion plans in Bidor, Johor. “We are scouting for opportunities to cater for future demand,” Lee said.