Seng Fong Holdings Berhad, a rubber processor producing and trading Standard Malaysia Rubber and premium grade block rubber, made a successful debut on the Main Market of Bursa Securities Malaysia Berhad, opening at RM0.75 per share with an opening volume of 10.8 million shares, which is the same as the initial public offering (IPO) price of RM0.75 sen per share.
Seng Fong’s market capitalisation at listing is RM389.22 million, and the company was listed under the stock name, SENFONG and stock code, 5308.
The Chairman of Seng Fong, Ng Ah Bah @ Kok Yee, highlighted that the listing provides the company the opportunity to realise its immediate objectives as well as investing in environmental, social, and governance (ESG) initiatives.
“Going forward, we will be well-positioned to capture opportunities arising from the increasing demand from our existing customers as well as from new customers as we ramp up production through the hiring of more people for a second shift and implementing ESG initiatives to make our business more sustainable.”
“Building a sustainable business also requires the support of our shareholders. Thus, we intend to distribute at least 50% of our annual net profit as dividend to shareholders, subject to the approval of the Board of Directors and shareholders.”
Block rubber is driven by the automotive industry with approximately 70% of global natural rubber being used for tyre manufacturing. Going forward, the world vehicle sector is anticipated to grow at a 5-year (2021 to 2025) CAGR of 7.03% to 105.0 million units.
Seng Fong is raising RM68.1 million from the IPO. From the proceeds, RM19.7 million has been allocated for working capital requirements including purchase of raw materials and the hiring of additional workers; RM37.9 million for the repayment of bank borrowings that include the partial funding for the solar system units, RM6.3 million to fund the installation of the biomass system units and RM4.2 million for listing expenses.
The installation of the solar system is estimated to achieve cost-savings of approximately RM2.6 million per annum from electricity costs and a further RM3.5 million per annum from diesel costs through the installation of the biomass system.
For the financial year ended 30 June 2021, the Company’s export market share of block rubber stood at 11.8% based on its export output of 121,404 tonnes against the country’s total export volume for block rubber of 1.03 million tonnes in 2021. Seng Fong’s revenue is almost entirely derived from exports, with the primary markets being China, Hong Kong, Singapore, and Taiwan.
The block rubber produced by Seng Fong are sold directly to end-user customers, majority are tyre manufacturers, and are also sold to international rubber traders. Block rubbers which are sourced from international rubber traders and/or natural rubber processors, for trading purposes, are sold to tyre manufacturers.