CFA Society Singapore
SINGAPORE (Oct 23): MeGroup, the Malaysian-based car dealership and automotive parts maker, which is seeking a listing in the Catalist board of the Singapore Exchange (SGX) launched its initial public offering (IPO) today with the sale of each share at 23 cents.
The group will be offering a total of 16.5 million new shares, with 1.5 million shares in the public tranche and 15 million shares in the placement tranche. The IPO is expected to raise net proceeds of about $2.4 million.
The IPO will close at 12 noon on Oct 29 and shares in MeGroup will officially trade on the SGX at 9am on Oct 31.
The group first lodged its preliminary offer document to SGX on Sept 27.
MeGroup operates a manufacturing and dealership business in the Malaysian automotive industry. It has two manufacturing plants in Selangor, Malaysia, that produces noise, vibration and harshness (NVH) components and other non-NVH components.
As for the group’s dealership business, it owns and operates 3S and 4S dealerships, and is the authorised dealership operator for Honda, Mazda and Peugeot.
The group intends to use 47.4% of the proceeds or $1.8 million for business expansion, including organic expansion, as well as mergers and acquisitions, while the remaining 15.4% or $0.56 million is intended for general working capital purposes.
Immediately upon listing, MeGroup will have a market capitalisation of $27.3 million, representing 9.2 times the group’s earnings for FY18 ended March.
Post IPO, the group’s net asset value (NAV) per share is expected to be 31.82 sen (10.5 cents).
On its outlook, the group plans to upgrade its machinery/equipment and acquire new technology to expand upstream activities; diversify into other NVH and non-NVH businesses; and expand its business through investments, acquisitions, joint ventures (JV), strategic alliances and/or new product offerings.
In a Tuesday IPO fact sheet, UOB KayHian says that MeGroup’s competitive strengths include having already developed long-standing partnerships with manufacturing customers; a diversified and balanced portfolio of business within the Malaysia automotive industry; maintained established relationships with principals; and an experience and committed management team with proven track record.
However, some of the key risks include client concentration risk, as major customers accounted for an aggregate of 28%, 36% and 22% of the group’s FY16, FY17 and FY18 revenues respectively.
In addition, the group is exposed to business cycles in the construction industry, as it has embarked on the provision of NVH components to the heating, ventilation and air-conditioning (HVAC) industry, starting Jan 19.
Meanwhile, the dealership business in Malaysia is subject to changes in the Malaysia legislation pertaining to automobile ownership.
The group does not have a formal dividend policy and has not distributed any dividend since incorporation on Feb 7.