ACE Market-bound building and infrastructure construction services provider Nestcon Bhd is optimistic about growth prospects in the industry, underpinned by the positive outlook of the country’s construction industry.
This is given the Malaysian construction industry is projected to grow by 7% year-on-year in 2021, according to the Department of Statistics Malaysia and Protégé Associates.
Growth drivers include the continuation of the implementation of various infrastructure projects such as the East Coast Rail Link (ECRL) and Mass Rapid Transit Phase 2 (MRT 2).
Moreover, various initiatives are underway to meliorate the property glut via the re-introduction of the home ownership campaign (HOC) and stamp duty exemption.
“We have built a solid and defensive business foundation that has withstood multiple trials and tribulations in the past, including the initial shocks from the recent COVID-19 pandemic,” commented Nestcon Bhd’s group managing director Datuk Dr Lim Jee Gin.
“Prudent management and strict cost discipline have enabled the group to face the crisis in a position of strength.”
While the group’s revenue in FY2020 was marginally affected by the movement control order (MCO) 1.0, its profit performance remained intact with net profit and non-controlling interests margin improving from 3.5% in FY2019 to 4.2% in FY2020.
“We are seeing project tenders increasing albeit at a slower pace,” projected Lim. “Our tender sum has grown to about RM2.8 bil with a good balance of tenders from both building and infrastructure segments.”
The group currently has a 22 on-going contracts worth approximately RM1.9 bil of which RM1.2 bil remains unbilled, representing 4.13 times of its four-year average revenue of RM293.97 mil (FY2017-FY2020). The group expects the unbilled portion to continue contributing positively to its financial performance until 2023.
Some of Nestcon’s notable on-going projects include Scarletz Suites, Mossaz and Paxtonz by the EXSIM Group; Panorama Residences by LLC Bhd; Embayu @ Damansara West by Premier Baycity Sdn Bhd (a member of PRG Holdings Bhd); Kuchai Sentral by Menta Land Sdn Bhd; one identified section of the East Coast Rail Link Project,; and three identified sections of a railway project in Johor.
Nestcon will be raising approximately RM45.1 mil from its IPO exercise with the following planned utilisation of proceeds:
- RM6 mil (13.3%) for establishing an industrialised building system (IBS) facility for the building division;
- RM6.6 mil or RM7 mil (14.7%) for acquisition of machineries and equipment for business expansion in the civil engineering and infrastructure division;
- RM1 mil (2.2%) for upgrading of software and systems;
- RM5 mil (36.6%) for repayment of bank borrowings;
- RM11 mil (24.3%) for working capital; and
- The balance of RM4.0 mil (8.9%) to defray the estimated listing expenses.
Nestcon’s IPO at an issue price of 28 sen/share entails a public issue of 161 million new shares which represent about 25% of its enlarged share capital along with an offer for sale of 32.2 million existing shares in the following manner:
- 2 million new shares for the Malaysian public;
- 2 million new shares for eligible directors, employees and persons who have contributed to the success of our group;
- 5 million new shares by way of private placement to Bumiputera investors approved by the Ministry of International Trade and Industry (MITI); and
- 1 million new shares by way of private placement to selected investors;
- Offer for sale of 32.2 million existing shares by way of private placement to selected investors.
Pursuant to the launch of its prospectus, applications for the public issues of Nestcon’s shars are open from today (June 8) till June 17 at 5pm. Listing is tentatively scheduled on June 29.
Upon listing on the ACE Market, Nestcon will have a market capitalisation of RM180.27 mil based on an issue price of 28 sen with an enlarged issued shares of 643.8 mil.
For the IPO exercise, M&A Securities Sdn Bhd is the adviser, sponsor, underwriter, and placement agent, while Eco Asia Capital Advisory Sdn Bhd is the financial adviser. – June 8, 2021
