KTC (0180) - Kim Teck Cheong to raise RM21.3m
KUALA LUMPUR: Kim Teck Cheong Consolidated Bhd (KTC) ( Valuation: n/a, Fundamental: n/a), a Sabah-based consumer package goods manufacturer and distributor founded by the Lau family, is looking to raise RM21.3 million in its initial public offering (IPO) on the ACE Market of Bursa Malaysia, which is slated in the last week of next month.
KTC executive director Dexter Lau said the company intends to use the proceeds to expand its current 18 warehouse facilities and its own line of frozen, dry and bakery products under its Orie, Bamble and Creamos brands.
Dexter is the grandson of KTC’s founder Datuk Lau Yeong Ching and son of managing director Datuk Lau Koh Sing.
“About 48% will be going into the acquisition of warehousing facilities in Sarawak, 10% will be used for construction of new warehousing facilities in Sabah, 16% will be for the purchase of new equipment for our bakery manufacturing plant and 10% is for our manufacturing capital,” he told The Edge Financial Daily in an interview. The company is launching its IPO prospectus today.
The rest will be used to pay for listing expenses.
KTC plans to sell 142 million new shares, representing 27.83% of its share capital, at an issue price of 15 sen, which represents a historic price-earnings ratio of 14.02.
Out of the total issuance, 34 million shares will be made available to the public, 16.26 million shares for eligible employees of the group, while the remainder of 91.75 million shares will be allocated for private placement to selected investors. Post-IPO, the Lau family's shareholding in the company will be reduced to 72.17%.
Dexter said the company had already identified institutional investors for the placement of shares, which comprise local insurance and unit trust funds.
Currently, KTC has 18 distribution warehouses and centres across Sabah and Sarawak, through which it distributes third-party brands of products including Gillette, Dynamo, Coca-Cola, Kimberly-Clark, Revlon and Shiseido.
The company also manufactures its own line of food and beverage products, which are produced at its existing bakery manufacturing plant in Kota Kinabalu, Sabah, under its wholly-owned subsidiary Creamos (Malaysia) Sdn Bhd.
Dexter said KTC will be introducing 20 new products under its in-house brands over the next five years.
“We intend to continuously expand our bakery manufacturing business and we will continue to introduce new products in the value-for-money sort of range. That’s what the industry needs now,” he added.
Between the distribution of third-party brands and in-house brands, Dexter said the former makes up the bulk of the company’s revenue at 90%, while the latter contributes the rest.
“No matter what, the distribution line will still be our bread and butter. Our own brands will only provide us with better margin and profitability in terms of increasing our profitability, leveraging on the distribution network that we have built over the years,” said Dexter.
Asked if the company sees an equal contribution from its third-party brands and in-house brands in the future, Dexter said it is unlikely as the third-party brands are already established, meaning that there is already a market for these products.
Despite the company importing its third-party brands for its distribution business, Dexter said there has been no impact yet from the weakened ringgit, as it imports mostly from Peninsular Malaysia.
However, he said the pricing of the products could be impacted in the future.
KTC currently has the major share of the Sabah consumer package goods market, where the company has been operating since 1938 and is progressively growing its foothold in Sarawak, a market it entered two years ago.
With its strong foothold in Sabah and Sarawak, the company is eyeing expansion into Brunei next, by establishing a distribution centre there.
“The Brunei market is considered a low hanging fruit for us in terms of our distribution channels. Since we’re already in Sabah and Sarawak, we might as well complete [for] the whole [Borneo] island.
“The plan for Brunei is not only limited to the distribution of third-party products, we will also introduce our own brands there, providing us with some room for growth,” he said.
Dexter said discussions are ongoing for a RM1.54 million acquisition of a distribution company in Brunei, which it intends to conclude early next year.
Dexter, however, said the company has no plans to expand into Peninsular Malaysia for now.
With its expansion plans in place, KTC aims to maintain its strong double-digit revenue growth for the financial year ending June 30, 2016 (FY16), noting that the company has been growing at a compound annual growth rate of 14.4% from FY12 to FY15.
In FY14, KTC recorded a net profit of RM5.49 million, up 22% from RM4.49 million in FY13, on the back of a 3% improvement in revenue to RM229.53 million from RM222.73 million.
