Tuesday, February 02, 2010

Seremban Engineering IPO Approved

Proposed Flotation
SUCCESS TRANSFORMER CORPORATION BERHAD (STC)
- Proposed listing of Seremban Engineering Berhad (formerly known as Seremban Engineering Sdn Bhd) (SEB or Company), a wholly owned subsidiary of STC, on the Main Market of Bursa Malaysia Securities Berhad (Bursa Securities) (Proposed Flotation)

We refer to the announcements made on 2 September 2009, 6 October 2009 and 19 November 2009 in relation to the Proposed Flotation (Announcements). Unless otherwise defined, the definitions set out in the Announcements shall apply herein.




On behalf of the Board of Directors of STC, RHB Investment Bank wishes to announce that the SC had, vide its letter dated 29 January 2010, approved the Proposed Flotation pursuant to the following:
(i) Section 212(5) of the Capital Markets and Services Act 2007, subject to the
following conditions:
(a) To allocate 50% of the public spread requirement to Bumiputera investors;
(b) SEB is to obtain the necessary approval from the relevant authority on the open-sided structure of Lot 10383, Mukim of Rantau, District of Seremban, Negeri Sembilan within 6 months from the date of the SCs decision letter;
(c) The directors of SEB to provide the SC with a declaration, confirming that the SEB Group has sufficient working capital for the next 12 months;
(d) RHB Investment Bank to provide a written confirmation on the due diligence steps undertaken to satisfy themselves that the declaration mentioned in (c) above by the directors of SEB has been properly made;
(e) SEB not to declare any dividends prior to its listing on the Main Market of Bursa Securities; and (f) full compliance with all the relevant requirements relating to the implementation of the Proposed Flotation as stipulated in the Equity Guidelines; and

(ii) The equity requirement for public companies.

The SC has also granted the approval-in-principle for the registration of the Prospectus. The Board of Directors of STC will deliberate on the conditions imposed by the SC.
This announcement is dated 29 January 2010.

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The company's key products include the following:
High-intensity discharge (HID) lighting luminaries
Low voltage transformer
Automatic voltage stabilizers
Battery charger and tester
Energy saving lumens regulator
Phase monitoring relay
Reactor
Running light controller

Catalyst #1: Success Transformer Corp Bhd is proposing to list its wholly-owned subsidiary, Seremban Engineering Bhd, on the main market of Bursa Malaysia. In a filing on behalf of the company, RHB Investment Bank Bhd said Success Transformer’s board had approved the proposed flotation comprising several proposals to facilitate the listing exercise. Can reasonably expect some free shares since its a 100% company that is being listed.

Success Transformer Corporation Bhd’s (STC) subsidiary, Seremban Engineering Bhd (SEB), has entered into a cooperation agreement with Affcom Resources Sdn Bhd towards forming a joint venture (JV) company in the oil and gas (O&G) industry. STC said the objective was to incorporate a JV company to undertake the design and fabrication of equipment, refinery, lube oil plant and engineering and any other related activities.




Malaysia-incorporated Affcom is an affiliate to an independent integrated oil company and its activities cover trading, marketing, refining, and O&G fabrication in Malaysia and abroad.

SEB is mainly involved in the manufacturing and fabrication of process equipment such as unfired pressure vessels, heat exchangers, tanks, silos and other machinery or parts, including mechanical works, maintenance and shutdown works. STC said Affcom would provide the expertise in management, consultancy, market information, and any other contribution in the best interest of the mutual business cooperation.

Catalyst #2: Success Transformer Corp Bhd (STC) says its engineering unit currently has some RM30mil worth of projects in hand and is bidding for new jobs worth about RM40mil. Palm oil and waste management industries remain Seremban Engineering Sdn Bhd’s (SESB) main contributors. SESB has started construction work on its seventh factory by end-September. The new factory will focus on the fabrication of process equipment for the food and pharmaceutical industries. SESB’s factory expansions are on track with the 5th factory being operational and the 6th expected to be operational on 2H FY09. On top of that, Seremban Engineering is in the process of setting up another factory to specifically serve the food industry.Seremban’s current workflow consists of pressure vessels for palm oil refineries.

Key customer, a Singapore based design house is farming substantial business to SESB given the latter’s strong execution capabilities. Visibility is seemingly positive with the key customer guiding for constant workflow till the end of the year. With Plant 5 now fully onstream, capacity is further enhanced by 20%.

Catalyst #3: Earnings visibility and sustainability. The company recorded revenues of RM185 million in the fiscal year ended December 2008. Its net profit was RM23.6 million in fiscal 2008. 1H09 revenue was RM97.4m, while RM12.9m was its net profit. Annualise that, the company is making at least 22 sen a share.

Catalyst #4: Operating margins 18%. For a company that has been making EPS in the 15-28 sen region for the past 3 years (on an uptrend), expanding its facility, and operating at that margins, to trade at low single digit PERs is unbelievable. Obviously many investors have not wised up to this company.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

4 comments:

henry said...

Hi, is the Seremban Engineering IPO is FREE for every 15 Success share holder? Unable to locate this announcement. Thanks

CH said...

has to be free if not why the ratio of 1 SE for 15 ST shares?

Melvin Lim said...

Hi Dali, is SE worth subscribing at RM 0.85? Do you have any fair value?

Melvin Lim said...

Sorry, forgot to ask, I bought Success based on what you recommended, now slightly underwater. Is the fundamental still the same?