Laboratory group LMS Compliance to raise S$3.6 million in Catalist listing

LMS COMPLIANCE, a provider of testing and certification services, on Tuesday (Nov 22) launched its initial public offering (IPO) for a Catalist listing on the Singapore Exchange (SGX).

The Malaysia-based company is looking to raise gross proceeds of S$3.64 million through the sale of 14 million shares at S$0.26 apiece.

Net proceeds will amount to S$2.04 million. More than half these proceeds, or S$1.2 million, will be set aside for acquisitions, joint ventures and strategic alliances in countries such as Malaysia, Indonesia and China to grow the company’s business. 

Another S$0.54 million has been set aside for general working capital purposes, while the remaining S$0.3 million is earmarked for the expansion of two of the company’s business segments: the certification services segment and the conformity assessment technology distribution segment.

Based on the issue price, LMS Compliance will have a market capitalisation of S$22.7 million at listing and a price-to-earnings ratio of 12.4 times.

LMS Compliance was founded in 2006, and provides testing and certification services to industries such as food, fertiliser, pharmaceuticals and medical devices, and healthcare. 

Some of the services the group provides include environmental pollutant monitoring, microbiological testing and nutrition facts testing. Apart from laboratory testing services, the group has also diversified into providing certification services, and the trading of laboratory equipment and chemicals. 

As at Sep 16, the company offers more than 1,100 accredited tests and 10,200 non-accredited tests. 

In an interview with The Business Times, LMS Compliance chief executive Louis Ooi said the company began with services for the feed industry because it was “less sophisticated” than some of the industries the group covers today. 

Ooi had noted there were a number of feed millers in Penang, Malaysia, where he is from, so LMS Compliance ventured to “bring new life” to laboratory operations for this industry.

When LMS started out, it offered databases that were manually updated by staff. This led to some human errors, he noted. 

The company later added digital laboratory solutions, which improved standards as well as margins.

Ooi said that prior to digitalisation, LMS Compliance’s margin was less than 20 per cent. In comparison, the group’s net margin for the first quarter of 2022 stood at 32.5 per cent.  

“Our main cost is the labour cost,” said Ooi, adding that there is a need for LMS Compliance to “increase the productivity of labour”.

For FY2021, the group reported earnings of RM4.9 million (S$1.5 million) – up from a profit of RM4.7 million in FY2020. Revenue was up 7.6 per cent at RM17 million, from RM15.8 million.

For the first quarter this year, net profit rose to RM1.4 million from RM1.1 million in the year-ago period. Revenue was up 10.4 per cent at RM4.4 million.

On why the group has decided to list at this particular time, given macroeconomic uncertainties, Ooi said “there is no right or wrong timing”. The company began looking at listing two years ago, and finally settled on Singapore due to factors such as the “strong currency” and “corporate governance”.

Following the listing, LMS Compliance said it plans to increase the range of its tests as well as expand into new sectors – such as oil and gas, agriculture, basic metals and hotels. The company will do so by investing in new laboratory equipment, cleanrooms and instruments, as well as hiring new chemists and marketing staff, it said.

The group is also looking to enhance the features and capabilities of its laboratory solutions. 

While LMS Compliance does not yet have a fixed dividend policy, its directors intend to recommend and distribute dividends of at least 20 per cent of earnings for FY2022 to FY2024.

The offer will close at noon on Nov 29, with the listing and trading of LMS Compliance’s shares expected to commence at market open on Dec 1.