CATEGORISED under the construction sector, building and infrastructure construction services provider Nestcon Bhd made a stellar debut on the ACE Market of Bursa Malaysia today.
Year-to-date, Nestcon is the second-largest initial public offering (IPO) in the ACE Market in terms of amount raised (after Teladan Setia Group Bhd). The group amassed a total of RM45.1 mil from the public issue of its IPO exercise.
Nestcon opened at 30 sen or a 2 sen premium over its issue price of 28 sen/share with a volume of at 28.4 million shares.
“We believe the IBS (industrialised building system) facility we are establishing will elevate our building segment capability meaningfully and put us on the front foot among our peers,” commented Nestcon’s group managing director Datuk Dr Lim Jee Gin.
“The mass production technique has been adopted by many of the big construction companies in Malaysia due to its long list of benefits such as quality control, costs reduction, acceleration of timelines, to name a few.”
In addition, Lim pointed out that IBS will enable the group to reduce its reliance on foreign workers as the industry faces potential foreign labour shortages. Moreover, the addition of new machineries and equipment will enhance the civil engineering and infrastructure segment as we look to tender for more larger-scale projects.
Of the RM45.1 mil proceeds, 13.3% or RM6 mil will be used to establish an IBS facility for the building division; purchase of machineries and equipment (14.7% or RM6.6 mil); repayment of bank borrowings (36.6% or RM16.5 mil); working capital needs (24.3% or RM11 mil); and upgrading of software and systems (2.2% or RM1 mil).
The remaining RM4 mil (8.9%) is set aside to defray listing expenses.
On a macro level, Nestcon is optimistic about the construction industry backed by government-led initiatives and spending relating to infrastructure and housing developments.
With the money raised from this IPO exercise coupled with the acceleration of vaccination roll-out, Lim is confident that Nestcon is able to capitalise on the growth of the industry moving forward.
Moving forward, the group is also looking to expand its portfolio to include new projects like renewable energy works.
“We want to continue to bolster both divisions to solidify our market position as a comprehensive construction company as we pride ourselves as being equally competent in both our building segment as well as our civil engineering and infrastructure segment,” Lim explained.
To re-cap, Nestcon recorded a commendable revenue of RM95.6 mil for its 1Q FY2021 ended March 31, 2021 with a net profit of RM3.7 mil, translating into a net profit margin of approximately 3.9% for that quarter.
Despite the ongoing COVID-19 pandemic, the group has yet to encounter any contract termination thus far and has a solid order book of RM1.9 bil from clients of strong fundamentals, out of which RM1.2 bil remains unbilled. In terms of order book replenishment, it has approximately 51 tenders valued at around RM2.8 bil.
At 12.09pm, Nestcon was up 4 sen or 14.29% to 32 sen with 240.07 million shares traded, thus valuing the company at RM155 mil. – June 29, 2021
