KUALA LUMPUR (June 20): SFP Tech Holdings Bhd made a strong debut on the ACE Market of Bursa Malaysia with an opening price of 60 sen, representing a premium of 30 sen or 100% above its initial public offering (IPO) price of 30 sen.

The one-stop integrated engineering and automation solutions provider emerged as one of the top actively traded stocks in the local bourse in early trade on Monday (June 20).

At the midday break, SFP Tech was trading at 66 sen, with 237.46 million shares done.

Speaking after the listing ceremony, SFP Tech managing director Keoh Beng Huat said the listing marks the beginning of a new chapter for the company.

“We have developed a clear road map and hope to grow from strength to strength and create value for all our shareholders as we now embark on a more challenging growth trajectory aiming for better and higher returns to all our shareholders,” Keoh said.

SFP Tech first commenced its operations in sheet metal fabrication back in 2012 and later was also involved in the provision of computer numerical control machining and mechanical assembly services, as well as the provision of automation equipment solutions.

The group has customers in Malaysia, the US, Singapore, Vietnam, Thailand and Europe.

En route to listing, SFP Tech shares made available for the public have been oversubscribed by 41.61 times.

“As demonstrated from the public portion of our shares which was oversubscribed by 41.61 times, this is a strong testament from the public to our abilities and potential which we are greatly thankful for and we will continue to strive for better achievements and higher shareholder value in the coming years,” Keoh added.

The IPO exercise entails a public issue of 207.44 million new ordinary shares with an enlarged issued share capital of 800 million, bringing SFP Tech a market capitalisation of RM240 million at the point of listing.

SFP Tech said the IPO proceeds of RM62.23 million will be predominantly utilised for its capital expenditure, which includes the construction of Manufacturing Plant 3 in Penang Science Park and purchase of machineries. It will also be utilised for the set-up of a design and development centre.

Keoh also confirmed that the timeline for the approximately 2,000 sq ft Manufacturing Plant 3, which is expected to be completed by the end of the second quarter of 2022 and fully operational by the fourth quarter, is on track.

On the group’s dividend policy, SFP Tech head of corporate strategy and communications Ivan Yap said a policy had yet to be fixed except that there are plans to pay a dividend if the company’s profit grows.

In a bourse filling on June 16, the Penang-based company posted a revenue of RM17.9 million and a net profit of RM8.67 million for the first quarter ended March 31, 2022 (1QFY22).

And according to SFP Tech’s fact sheet, its revenue leaped from RM41.1 million for FY20 compared with RM30.3 million for FY19, while net profit rose to RM17.65 million for FY20 compared with RM10.53 million for FY19. It did not state the financial results for FY21.

“Our first-quarter results are an indication for our [growing] trend but bear in mind that there was an exceptional gain in the results from our acquisition of EST [Exhibit Automation Sdn Bhd],” said Yap.

EST focuses on provision of automation equipment solutions and trading of spare parts.

Moving forward, SFP Tech plans to further expand both its engineering supporting services and automated equipment solutions into other industries such as automotive and healthcare.

The group also intends to move into the semiconductor back-end inspection industry through the manufacturing of vision inspection equipment platforms embedded with camera imaging and electronics systems.

Yap said the global semiconductor chip shortage issue faced by SFP Tech is under control while it hopes for the situation, prompted by lockdowns in China and geopolitical scenarios, to ease.

In regard to the weakening of the ringgit, Yap said SFP Tech would benefit as the company is a net exporter.

“As for fluctuations in material prices happening on a weekly basis, of course our quotes also change accordingly. There is a pass-through mechanism to our customers,” Yap said.

He added that the cornerstone of SFP Tech's earnings is still from foreign-based multinational companies.

Public Investment Bank Bhd is the principal adviser, sponsor, sole underwriter and sole placement agent for the IPO exercise.

Meanwhile, Hong Leong Investment Bank (HLIB) Research has initiated coverage of newly listed SFP Tech with a "buy" call and a target price (TP) of 63 sen per share.

In a note on Monday, the research house said that the home-grown engineering supporting service provider is a compelling case given its strong foothold in the semiconductor, electrical and electronics and solar photovoltaic spaces.

“We initiate coverage of SFP Tech Holdings with a 'buy' recommendation and a TP of RM0.63/share based on 18 times price-earnings (P/E) for financial year 2023 (FY23) profit at a deep discount of about 30% to the weighted average one-year forward P/E multiple of 26 times to reflect: i) its listing on the ACE Market — rendering it less investible to most institutional investors; and ii) its relatively smaller market capitalisation versus its peers,” said the research house.

‘We project earnings to grow significantly at a three-year compound annual growth rate of 22% for FY22-24,” said HLIB.