PETALING JAYA: ACO Group Bhd, which is set to list on the Ace Market of Bursa Malaysia on March 18, is looking to open seven new sales outlets over the next three years, bringing it to a total of 15 outlets.
The distributor of electrical products and accessories said its strategy is to set up these outlets in second-tier cities across Peninsular Malaysia, where it would have greater competitive advantage.
The group, which launched its prospectus yesterday, plans to invest about RM1mil per sales outlet, apart from setting up two new distribution centres.
Executive director Sean Tan Yushan said the group decided to pursue the listing to fund its expansion plans beyond Johor, Melaka and Selangor where is currently has presence.
“We see less competition in the second-tier cities and compared to the competitors currently operating in these cities, we have an advantage in terms of economies of scale.
“We can command better margins – we are more efficient, have better inventory management systems and can expand much faster with the funds that we will raise, ” he said in an interview after the prospectus launch.
Group managing director Tang Pee Tee @ Tan Chang Kim said ACO would focus on expanding organically in Malaysia for now before looking abroad.
“Domestically, we still see a lot of potential and we want to strengthen our presence in Malaysia for now, ” he said.
ACO Group distributes 88 brands of electrical products and accessories, comprising 85 third-party brands and three of its own.
The group also has a lighting concept store called “UR Home Light” in Johor Bahru.
Of its third-party brands, ACO Group is an authorised distributor for 10 brands of electrical products and accessories that include Schneider Electric, KDK, Hager, Omron, ABB and Panasonic.
From the IPO exercise, the group is set to raise about RM16.2mil, of which RM4.2mil or 25.9% would be used to set up new sales outlets and concept stores, RM2.5mil (15.4%) for its new head office and distribution centre in Johor, and RM2mil (12.3%) to purchase new trucks and upgrade its IT systems.
The balance will be used for working capital and listing expenses.
In terms of financial performance, the group’s revenue grew from RM114.5mil in the financial year ended Feb 28,2017 (FY17) to RM134.4mil in FY19, representing a two-year compounded annual growth rate (CAGR) of 8.3%.
Profit after tax rose from RM4.5mil in FY17 to RM7.4mil in FY19, at a two-year CAGR of 29%.
ACO Group’s IPO entails a public issue of 58 million new shares, representing 19.3% of its enlarged capital, and an offer for sale of 25 million existing shares.
Applications for the public issue are open and will close on March 6 at 5pm.
Upon listing, ACO Group will have market capitalisation of RM84mil based on the issue price of 28 sen and an enlarged capital of 300 million shares.