KUALA LUMPUR: Door system solution provider Econframe Bhd aims to raise RM18.2mil from its initial public offering (IPO) to build a new factory in Kapar, Klang and increase production capacity.

The Klang-based group, en route to an ACE Market listing on Oct 27, supplies metal door frames, fire resistant door sets, wooden and metal doors as well as ironmongery such as locksets and hinges.

Of the funds raised from the IPO, RM5mil (27.5%) will be for land acquisition and building a new manufacturing facility, RM4mil (22.0%) for investment in manufacturing automation, RM6.2mil (34.1%) for working capital, and the remaining RM3mil (16.4%) for listing expenses.

Group managing director Lim Chin Horng said the new manufacturing plant, which is targeted for completion within two years, would house all the group’s facilities under one roof.

“This will significantly improve our operational efficiency and productivity compared to having four separate factories now in the Sungai Rasau Industrial Area in Klang,” said Lim at the Econframe’s IPO prospectus launch at The St. Regis Kuala Lumpur.

Established in 2001, the group’s products are supplied to residential, commercial, mixed and industrial developments in Malaysia via main contractors or building materials trading arms of property developers such as Aset Kayamas Group, Eco World Development Group Bhd, Gamuda Bhd, IJM Land Bhd, IOI Properties Group Bhd, LBS Bina Group Bhd, Mah Sing Group Bhd, Matrix Concepts Holdings Bhd, Sime Darby Property Bhd and S P Setia Bhd.

“Our focus is to capture a larger market share through acquiring new customers and catering for larger orders from existing clients. We will also invest in automation and advanced robotic technology to improve operating efficiency.’

“With improved manufacturing workflow and technology, we expect to improve our annual operating capacity by 35% for both our metal door frames and fire resistant door sets,” said Lim.

The group is also planning to start production of wooden doors early next year, to improve earnings. Presently, the group sources wooden doors from third party suppliers.

Group revenue grew from RM35.49mil in the financial year ended Aug 31, 2017 (FY17) to RM44.09mil in FY19, representing a two-year compounded annual growth rate (CAGR) of 11.5%.

Profit-after-tax more than doubled from RM3.11mil in FY17 to RM8.14mil in FY19, at a two-year CAGR of 61.7%.

According to SMITH ZANDER INTERNATIONAL SDN BHD market research report, the metal door frame and door industry in Malaysia grew at a CAGR of 4.85% from 2016 to 2018, and stood at RM1.99bil in 2018, of which Econframe had a market share of 2%, based on group revenue.

The report noted that metal door frames are growing in usage, due to their durability and cost effectiveness.

Meanwhile, regulatory requirements for certain buildings continue to drive demand for fire resistant door sets.

In FY19, metal door frames contributed 54.4% to Econframe’s revenue, followed by fire resistant door sets (28.5%), wooden doors (9.9%), ironmongery (6.7%) and metal door sets (0.5%). As at Sept 6, 2020, the group’s order book stood at RM47.01mil which is expected to be fulfilled by end-2021.

“While the economic environment is challenging, our purchase orders came in very aggressively in the last two months,” said Lim.

He pointed out that government incentives had spurred property sales and take-up remained strong in popular areas in the Klang Valley, citing a recent launch in Desa ParkCity as an example.

As at May 31, the group had net cash of RM5.18mil and a gearing ratio of 0.03.

The group does not have a dividend policy, and Lim said “this would be reviewed based on business progress and environment.”

Based on the IPO price of 28 sen and an earnings per share (EPS) of 2.5 sen for FY19, the price-earnings ratio (PER) is 11.2 times.

The group’s promoters and selling shareholders are Lim and his sister Saw Nee who hold 50.9% and 46.7% stakes respectively in Econframe, and the remaining 2.4% is held by group executive director Khoo Soon Beng.

Upon listing, the promoters will hold in aggregate 70.1% of the enlarged issued share capital of 325 million shares.

Econframe’s IPO exercise entails a public issuance of 65 million new shares and an offer for sale of 32.5 million existing shares at an issue price of 28 sen per share.

Of the new shares, 16.25 million are for the Malaysian public; 3.25 million for eligible directors and employees; 13 million via private placement to selected investors; and 32.5 million by way of private placement to bumiputra investors approved by the International Trade and Industry Ministry.

Meanwhile, 32.5 million existing shares would be offered via private placement to selected investors. IPO applications will close at 5pm on Oct 12.
M&A Securities Sdn Bhd is the adviser, sponsor, underwriter, and placement agent for the IPO exercise.

 

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