MeGroup prices IPO at S$0.23 per share to raise S$2.4m

MALAYSIAN car dealership and automotive parts maker MeGroup has priced its initial public offering (IPO) at S$0.23 per share, ahead of a listing on the Catalist board of the Singapore Exchange.

The IPO will raise net proceeds of S$2.4 million through the issuance of 16.5 million new shares.

Upon its debut, MeGroup will have a market cap of S$27.3 million, which is 9.2 times its earnings for the 2018 fiscal year ended March 31.

The IPO comprises a placement tranche of 15 million shares and a public offer of 1.5 million shares.

The public offer closes at 12 noon on Oct 29, with trading to commence at 9am on Oct 31.

The group made a net profit of RM8.9 million (S$2.9 million) in the 12 months ended March 31, on revenue of RM148.8 million.

The manufacturing business accounted for 25.6 per cent of revenue and dealership for 74.4 per cent.

Earnings in the prior year had suffered when a fire caused by a short-circuit of an exhaust fan in August 2016 razed the main manufacturing plant in Klang Valley to the ground.

Though production was halted for only two days, a new plant had to be constructed, and the plant returned to full production capacity by the fourth quarter of the calendar year 2016, the group said.

Wong Cheong Chee, MeGroup's executive chairman and chief executive, said: "We don't use any more wall exhaust fans, we redesigned the entire factory to have a different exhaust system." The group has a smaller thermobonded felt plant nearby to the main plant, and an assembly line in Pulau Pinang.

MeGroup makes noise, vibration and harshness (NVH) components for car engine compartments and passenger cabins using thermobonded felts. Key customers include Honda and Perodua.

Last year, MeGroup began a push to diversify its customer base by clinching contracts from heating, ventilation and air-conditioning firms.

Mr Wong said: "The technology is exactly the same. NVH parts are used to insulate wind noise. For the air-con industry, they're insulating the compressor so you don't hear the humming.

"We signed a contract with Johnson Controls Hitachi and will start recording revenue from them at the end of this year or in January 2019, at the latest. This is the first company we're working with, there are may more air-con makers I have to approach."

On how he manages foreign currency risk, since raw materials purchases are made mainly in US dollars, Mr Wong said: "We buy forward the currency rate each time we want to book some material from overseas. When we quote a price to customers, our raw materials are always pegged at a higher exchange rate than the current rate. Our customers accept this because they are international players so they know fluctuations can cause a lot of problems."

MeGroup also wants to grow its dealership business by opening more outlets. It sells new automobiles under the Honda, Mazda and Peugeot brands.

The total industry volume for passenger vehicles in Malaysia is expected to grow at a compound annual growth rate of 2.2 per cent from 2017 to 2022, MeGroup said, citing figures from the Malaysian Automotive Association.

CIMB Bank is the sponsor and issue manager. CGS-CIMB Securities is the underwriter and placement agent.