Johor-based 5E Resources to raise S$10m in Catalist listing

5E Resources, a waste management services provider in Malaysia, is seeking to raise S$10 million in an initial public offering (IPO) on the Catalist board of the Singapore Exchange.

The company is looking to sell 38.5 million shares at S$0.26 apiece, comprising 2 million offer shares and 36.5 million placement shares.

The sale shares will represent 26.1 per cent of 5E Resources’ enlarged share capital of 147.5 million shares. The company will have a theoretical market capitalisation of S$38.3 million, 14.7 times its earnings of RM8 million (S$2.6 million) in FY2020. 

5E Resources is in the business of scheduled waste management in materials such as waste acid and alkaline, waste oil and electronic waste for 500 customers across the electronics, petrochemicals, semiconductor and agricultural industries. The company currently operates 3 waste treatment plants in Johor. Scheduled waste refers to hazardous waste that could be dangerous to public health or the environment.

The company also sells recovered and recycled products, and trades in chemicals that are used for waste treatment in the manufacturing industry. 

Chairman Loo Sok Ching said the company had considered listing in Hong Kong in 2020. Those plans were shelved after Covid-19 struck and the company considered the political climate there. (*see amendment note)

The company said 38.6 per cent of gross proceeds from the IPO would go towards the acquisition of land to build an off-site storage plant and serve small quantity waste generators in central peninsula Malaysia. 

The volume of scheduled waste in central peninsula Malaysia is expected to see a compound annual growth rate of about 5.2 per cent from 2019 to 2025, according to figures from Frost & Sullivan provided in the prospectus.

Chief executive of 5E Resources Lim Te Hua said the storage site is essential so the small quantities of waste that the company collects can be consolidated and brought back to Johor for processing in larger amounts.

Capital investment in infrastructure to enhance the company’s production efficiency would take up 22.4 per cent of the gross proceeds. 

The company said that it would expand its processing capacity for high organic content waste. Such waste would be processed into alternative products, which can be disposed of at a lower cost. 

Lim noted that as Malaysia continues to see new developments in industries such as petrochemicals and rubber, it would likely generate more high organic waste. To meet this demand, the company will seek approval from Malaysia’s Department of Environment to process such waste while also upgrading their machinery to cope.

With these 2 growth areas, Lim expects revenue growth to be “significant” in the coming years. The company also expects to pay out at least 25 per cent of its net profit after tax from FY2022 to FY2024.

In FY2020 ended Dec 31, 2020, the company’s revenue declined by 18.2 per cent to RM44.0 million from a year ago. Net profit fell a further 33.4 per cent to RM8 million. (*see amendment note)

Lim said that this was due to a high base in FY2019 after the company received ad-hoc contracts from the government to clean up the Kim Kim River and the Johor Port. 

Since then, revenue for the first 9 months of 2021 has improved by 25.7 per cent to RM37.4 million year-on-year. Net profit, however, fell 30.5 per cent to RM4.2 million.

Loo, Lim and chief operating officer Shankar Narasingam will respectively hold a 26.68 per cent, 10.77 per cent and 4.46 per cent direct interest in the company post IPO.

*Amendment note: An earlier version of the article misspelled Chairman Loo Sok Ching’s name. The article has been amended to reflect the change.

*Amendment note: An earlier version of this story incorrectly said that the company’s financial year ended in Mar 31. It has since been updated.