Aztech Global to raise S$297m in IPO; sees theoretical market cap of S$990.4m

AZTECH Global, the technology unit of Aztech Group, on Thursday lodged its final prospectus, offering 68.12 million shares priced at S$1.28 each in its initial public offering (IPO).

Of this, 64.62 million are placement shares, while 3.5 million shares fall under the public offer.

Alongside the sale of 163.88 million cornerstone shares, the IPO will raise gross proceeds of S$297 million. Net proceeds thus stands at S$283.7 million; of which S$188.6 million will go to the company.

The remaining S$95.1 million, meanwhile, will go to Aztech Group.

Upon its mainboard listing on the Singapore Exchange (SGX), the company will have a theoretical market capitalisation of S$990.4 million, about 21 times its net profit of S$47.2 million for FY2019. This is also following the post-invitation share capital of 773.72 million shares.

The listing comes just less than five years after Michael Mun, executive chairman and chief executive of the company, took Aztech Group private. Established in 1986, the group started out as a personal computer manufacturer, and was listed on the Sesdaq in 1994, before being transferred to the mainboard in 2006.

But the time is ripe for Aztech to return to the mainboard, said Mr Mun in an interview with The Business Times (BT). Following the privatisation in 2017, the group refocused its business into the Internet of Things (IoT) and data communication segments, and divested its non-core businesses, such as food and beverage, building materials and marine logistics.

Now, after laying its foundations, and as "IoT devices (have) become hot in demand" over the past few years, an IPO deems fit to Mr Mun.

Aztech's key products comprise IoT devices, data communication products and LED lighting products, spanning across different sectors. For instance, its IoT devices include wireless IP (Internet protocol) cameras, smart light switches and healthtech wearables. As for LED lighting, this includes smart lighting systems, and luminaires, bulbs and tubes for residential, commercial and industrial lighting.

Net proceeds due to the company will be used for purposes such as the expansion and enhancement of its manufacturing facilities, enhancement of its research and development (R&D) capabilities, exploring further growth in the IoT market, as well as business expansion through mergers and acquisitions (M&A), for instance.

Jeremy Mun, executive director and chief operating officer of the company, told BT that through M&A, the group hopes to strengthen its market position and "expand to new areas that are complementary to (its) existing business", such as companies in the field of precision engineering.

Aztech is also looking to set up another manufacturing facility, possibly in the Asean region. At present, it has two manufacturing facilities in China, and one in Malaysia. It also has four R&D centres located in Singapore, Hong Kong, Shenzhen and Dongguan.

Since FY2017, the company has seen its revenue grow some 14 per cent to S$428.8 million for FY2019. Meanwhile, its net profit more than quadrupled to S$47.2 million.

For the nine months ended Sept 30 in FY2020, Aztech's revenue fell nearly 20 per cent from the corresponding period in FY2019 to S$262.2 million, while net profit slipped about 14 per cent to S$30.5 million. This was largely due to the impact of Covid-19 on its business operations.

Aztech currently has more than 290 customers worldwide, with its products sold in over 40 countries. Its key geographical markets include North America and Europe, which accounted for some 60 per cent and 33 per cent of the company's revenue for 9M FY2020.

Yet, to Mr Michael Mun, listing on the SGX seems to be a natural decision, as compared to the foreign exchanges.

"I'm born in Singapore, served my National Service, my family lives in Singapore, my management is in Singapore, my core team is here in Singapore," he said.

"Singapore is a hub for the capital market... (and) the SGX is one of the very recognised exchanges," he added. "That's why we chose (to list in) Singapore."

This is despite the fact that the company's Singapore customers only contributed to 1.3 per cent of its revenue for 9M FY2020.

Another reason, said Mr Mun, is that the Aztech brand name has a long-standing reputation in the local market.

"Investors and customers are two different things. A lot of investors know us, starting from 1994 (when) we already listed. Customer is different, customers know Aztech because of our capabilities, our facilities, our know-how and our track record," he said.

"Investors will know... when (we) show to investors our performance, our profitability, our product, our customer base - they look at it and they understand what we are doing."

Aztech's 18 cornerstone investors include DBS, acting on behalf of certain of its wealth management clients; the Employees Provident Fund Board; JPMorgan Asset Management (Singapore); and HSBC Global Asset Management (Hong Kong).

With the Covid-19 pandemic accelerating the demand for IoT and data communication products, Mr Mun is confident that the company is well poised to capture further growth in the market.

"We've come a long way, we built our core competencies in electronics (and) data communication," he said.

He added: "To make a product is quite complex... going forward, it will become more and more complex, and we are able to offer a (one-stop) solution. Just like you go to a supermarket, you walk in, you can buy all the ingredients you want. This is something we want to do."

The public offer opens at 9am on March 5 and closes at noon on March 10. Trading is expected to commence on March 12.