TIMBER bedroom furniture-maker LY Corporation Limited will make its initial public offering (IPO) debut on the Catalist board of the Singapore Exchange on Wednesday, becoming the first listing of the year.
The Malaysian firm, which announced its plans for an IPO last December, seeks to raise S$19.7 million in gross proceeds.
It is offering 75.8 million placement shares at S$0.26 a piece, comprising 61.2 million new shares and 14.7 million vendor shares.
No public shares are available for subscription.
When asked about this, the company told The Business Times that it was advised against offering public shares by its sponsor, UOB Kay Kian, because of cost issues.
The company said on Monday that the placement was "fully subscribed" and it had received valid acceptances for all placement shares.
The firm counts Heah Theare Haw - a substantial shareholder in mainboard-listed Geo Energy Resources - and Pheim Asset Management among the investors in the IPO.
In its final offer document released earlier this month, the company noted that the placement price of S$0.26 per share was "substantially higher" than its net asset value of S$0.13 per share, based on the post-placement issued and paid-up share capital adjusted for the net proceeds from the issue of the new shares.
The net proceeds raised from the placement will be S$16.7 million.
Net proceeds attributable to the group from the issue of new shares, after deducting estimated expenses of S$2.9 million, is about S$13 million.
The pricing reflects a price-to-earnings ratio of 8.1 times, based on the earnings per share of 9.7 sen from the audited combined statement of comprehensive income of the group for the year ended Dec 31, 2016, and the pre-placement share capital of about 426.7 million shares.
Of the net proceeds from the issue of new shares, LY Corporation will use S$1 million to expand its sales network in China, which it has identified as a key market for its business.
It will also dedicate S$5 million for the upgrading of machinery and equipment, and acquiring new technology.
Another S$4 million will be used for the construction of additional facilities, with the remaining S$3 million going towards general working capital purposes.
LY Corporation, the market capitalisation of which is S$127.2 million, will also explore investments and joint ventures in procurement, and collaborations with retailers or wholesalers.
The company said it has a market share of 9 per cent in Malaysia's wooden bedroom furniture export segment in 2016, but did not give a target to how much it aims to grow its market share post-IPO; it only said that its focus is to boost sales.
In H1 2017, LY Corporation recorded a 17.2 per cent increase in revenue to RM$166 million from the year before. Net profit was RM$21.6 million in H1 2017, up 21.6 per cent from H1 2016.
Its bottomline for the full year ended Dec 31, 2016, however, took a hit from weaker demand for its products. There was a drop in the selling price of some of its products, which shrank its gross profit margins to 26.1 per cent in FY 2016, from 28.1 per cent in FY 2015.
As the products it manufactures are bulky and not catered for markets like Singapore and Malaysia, LY Corporation said it is focusing on China and US, where its products are "more appealing". The group said, however, that China may prove to be a little of a challenge for it.
Tan Yong Chuan, chief executive and executive director of LY Corporation, said: "As we expand into China, there might be a lot of uncertainty, but right now, as far as our order book is concerned, we are quite optimistic."