Cleaning services company LS 2 Holdings to raise S$5.6m in Catalist listing

LS 2 HOLDINGS, an environmental services provider that specialises in cleaning services, on Tuesday (Feb 15) launched its initial public offering (IPO) for a Catalist listing on the Singapore Exchange (SGX).

The company will sell 27.75 million shares at a price of S$0.20 apiece, which will raise total proceeds of S$5.6 million. The IPO will not have a public tranche. The estimated net proceeds, after deducting expenses relating to the placement, will be S$4.4 million.

This placement represents 15 per cent of LS 2 Holdings's post-placement share capital of 185 million shares. The group will have a theoretical market capitalisation of S$37 million after the placement.

LS 2's offerings include the likes of conservancy, facilities cleaning, housekeeping, school cleaning, road and beach cleaning services, as well as pandemic disinfection services for both the public and private sectors in Singapore.

Town councils, facilities managers for commercial and private residential properties, public and private education institutions and private companies are some of the company's customers.

The company has a network of subcontractors that it works with to deliver these services. Such partners also supplement the group's services, for instance in the areas of cleaning where specialised licences, equipment and manpower are required.

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Alvin Ong, 44, chief executive of LS 2 was appointed to the company's board on Sep 28 last year, and has close to 2 decades of experience in the environmental services industry.

Prior to joining LS 2, Ong was the managing director of Integrated Training Consultants - a training and consultancy services company that caters to the environmental services industry. He was also the general manager of cleaning and maintenance services group CSP Maintenance before that.

Ong will own 20 per cent of the company after the listing, and will be a controlling shareholder.  Another 65 per cent of the company will be held by LS 2's executive chairman Roger Tan.

The bulk of the net IPO proceeds raised by the company, or S$3 million, will be used to fund its business expansion plans, which include strengthening its market position in Singapore, expanding the scope of service offerings, engaging in strategic acquisitions and joint venture partnerships, as well as investing in equipment and technology.

A further S$1.4 million of the proceeds will be spent on working capital.

The group intends to diversify its offerings to include horticultural services and infrastructure-level cleaning services such as road cleaning services and waste management services.

It will also leverage existing government grants and our own resources to acquire commercially available equipment to further support our business processes and the requirements of its customers.

Depending on available opportunities in the market, LS 2 will leverage its network to acquire companies that have an established brand and market presence in the environmental services and integrated facilities management services industry.

LS 2 said it will take into consideration the capabilities, skills, technology and operational processes of the target companies, and whether these are synergistic to its business, before making an acquisition.

For the first half of the year ended June 2021, LS 2 posted net profit of S$1.9 million, down 55 per cent from earnings of S$4.2 million in the corresponding year-ago period. Revenue was down 9.8 per cent year-on-year to S$25.5 million due to the completion of 2 existing contracts from the private sector secured in previous financial years in FY2020. This was partially offset by new contracts that commenced in H1 2021.

For H1 2021, some of the group's key customers were the Ministry of Education and Changi Airport Group, accounting for 39.6 per cent and 5.8 per cent of the group's total revenue respectively.

RHT Capital is the full sponsor and issue manager for the IPO, while Soochow CSSD Capital Markets (Asia) is the placement agent.

The placement will close at noon on Feb 21, with LS 2's shares expected to commence trading on a ready basis at market open on Feb 24.