Aedge Group to raise S$1.7m in Catalist listing

Singapore

AEDGE Group - a provider of engineering, transport, and security and manpower services - is looking to sell 16 million shares in a private placement on Thursday in conjunction with its proposed listing on the Catalist board of the Singapore Exchange (SGX).

With shares priced at S$0.20 apiece, the company is looking to raise net proceeds of about S$1.7 million through the initial public offering (IPO). This placement represents some 15.1 per cent of the enlarged share capital of 106 million shares of the group. Based on the given price, Aedge's market capitalisation will be pushed up to S$21.2 million. This translates to a price-to-earnings ratio of 59 times.

Speaking to reporters at a press conference, Aedge's chief executive officer and founder Poh Soon Keng said the majority of the funds raised will be used to finance the acquisition of property, plant and equipment, while the balance will be utilised for working capital.

Said Mr Poh: "We hope to use the funds raised through this listing to upgrade and enhance our hardware and software, as well as to acquire more equipment to enable us to capture even more opportunities."

Aedge's three business segments see it providing a "broad range of services and solutions" to customers in government agencies, multinational companies, government linked companies and even schools.

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The group's security and manpower services segment is its biggest revenue contributor. This segment includes security services such as guarding and system integration, cleaning services, as well as manpower services such as sourcing and supplying aerospace technicians to companies in the field.

Its transport services business operates a fleet of 88 buses that serve routes between nine residential estates and the central business district, as well as school bus services.

Although the group's engineering services division is its smallest revenue contributor, Mr Poh said the segment has been growing quickly over the past three years. The group provides engineering services such as scaffolding and electrical engineering systems to the oil and gas, petrochemical, marine and construction industries.

Mr Poh said Aedge has been able to provide a "single point of contact" for its customers, and is able to get customers to use more than one service over time. This has also allowed the group to broaden its revenue streams.

While Aedge had forecasted growth for FY 2020 ended June, it had not accounted for the Covid-19 pandemic which put a dent in its financials. Its net profit for the fiscal year fell to S$400,000 from S$1.3 million a year ago, while revenue fell to S$23.7 million from S$24.5 million last year. Net profit margin, too, slipped to 1.8 per cent from 5.1 per cent.

The group said the pandemic had led to fewer cleaning and security contracts, cancellations of ad-hoc transportation contracts, as well as lower utilisation of its bus services. This was, however, partially offset by higher revenue from its engineering services segment due to more projects in the design and installation of scaffolding systems.

Mr Poh argues that while the group may face short-term effects such as delays in project completion, the medium and long-term outlooks of the industries it operates in remain positive, and the company is not exposed to "big risks" related to its projects such as cancellations. Competition from foreign firms is also not an issue.

Mr Poh said that the company does not face much competition from foreign firms in terms of securing contracts, as it is a specialist contractor. He added that the company has an advantage due to its diversified business segments.

Looking ahead, he noted that although the group has not entered into any definitive agreements currently, he will not rule out the possibility of expansion into new markets in South-east Asia to broaden its service offerings, particularly those that have synergies with or complement Aedge's current services. Joint ventures and strategic alliances with other parties in large or specialised projects are also plausible, he added.

UOB Kay Hian is the sponsor, issue manager and placement agent for the IPO, and will continue to be the sponsor of the company for three years from the date it is admitted and listed on Catalist.

The placement will close at noon on Dec 10, with the listing and trading of Aedge's shares expected to commence on a "ready" basis at market open on Dec 14.