UNLKE its more established electronic manufacturing service (EMS) peers, Aurelius Technologies Bhd, which is en route to a Main Board listing on Bursa Malaysia tomorrow (Dec 16), is very unlikely to get embroiled in forced labour allegations.
This is because unlike its three other counterparts, namely, ATA IMS Bhd, VS Industry Bhd and SKP Resources Bhd, Aurelius has no exposure to foreign worker issue.
“Notably, all of Aurelius’ workers are local workers. We are positive on this as most EMS players in Malaysia are heavily reliant on foreign workers and were plagued with ESG issues on alleged mistreatment of foreign labour,” commented JF Apex Securities Research’s analyst Nursuhaiza Hashim in an initiating coverage report.
“Therefore, Aurelius has less risk on environmental, social and governance (ESG) issue as compared to its peers while not facing any shortage of workers.”
Initiating coverage of Aurelius with a “buy” call and a target price of RM1.74 from its initial public offering (IPO) price of RM1.36, JF Apex Securities Research favours the Kulim Hi Tech park-based Aurelius for the following reasons:
- Expansion into semiconductor component segment which renders strong growth as compared to other EMS players who are mainly or solely focusing on consumer electronics (ie. home appliances segment excluding electronic devices);
- ‘Relatively ESG-compliant’ and less prone to foreign worker dispute as the group employs 100% local workers as opposed to its peers who rely heavily on foreign labour;
- Diversified customer base as top five clients (foreign companies or subsidiaries of US public-listed companies) contribute circa 90% of its total revenue; and
- New production facility is underway to spur immediate future growth with an annual capacity to be increased by 198.7% to 5.87 mil placement points (the number of components placed onto the printer circuit board) by end-CY2023.
For the record, Aurelius’ IPO involves the issuance of up to 103.87 million ordinary shares comprising public issue of 77.01 million shares and an offer for sale of up to 26.86 million shares.
The institutional offering of up to 80.96 million shares represents 22.60% of the enlarged issued shares while its retail offering of up to 22.91 million shares (6.40% of the enlarged issued shares) will be offered at a retail price of RM1.36/share.
The company is expected to raise RM104.73 mil in proceeds from the IPO, of which RM40 mil would be used to acquire new machinery and equipment, repayment of borrowings (RM29.52 mil), working capital (RM28.13 mil) and listing expenses (RM7.08 mil).
For its FYE 2021, communications and Internet of Things (IoT) products contributed 89.5% to the company’s revenue while electronic devices contributed 9.4% and semiconductor components contributed less than 1%.
The top three countries by revenue contribution for FYE2019 to FYE2021 were the US, Malaysia and Singapore which collectively accounted for 93.6%, 92.7%, and 89.3% of the total revenue. – Dec 15, 2021
