KUALA LUMPUR (June 21): ACE Market-bound Ecoscience International Bhd aims to raise RM24.65 million from its initial public offering (IPO), partly to establish a new fabrication facility in Indonesia.

The IPO comprises 112.17 million shares — 33% of the Ecoscience's enlarged share capital — including a public issue of 82.17 million new shares and an offer for sale of 30 million existing shares, said the palm oil mills builder.

Of the total shares offered, 17 million shares will be made available to the Malaysian public, and 6.8 million shares to eligible directors, employees and persons who have contributed to the success of the group.

Another 42.5 million shares will be made available by way of private placement to bumiputera investors approved by the Ministry of International Trade and Industry, and the remaining 45.87 million shares will be made available by way of private placement to selected investors. 

Based on an issue price of 30 sen per share, coupled with an enlarged share capital of 340 million shares, Ecoscience will have a market capitalisation of RM102 million upon listing.

Of the RM24.65 million proceeds to be raised via the listing exercise, Ecoscience said it has earmarked RM7.85 million (31.8%) for working capital, RM7 million (28.4%) for repayment of bank borrowings, and RM5 million (20.3%) million for the establishment of a new fabrication facility and office in Indonesia.

Of the remaining proceeds, RM3.8 (15.4%) million has been allocated for the estimated listing expenses and RM1 million (4.1%) for the expansion of the company's environmental and energy efficiency business.

Ecoscience is a one-stop solution provider and turnkey contractor for construction of plants and facilities for palm oil mills and plantations with in-house fabrication capabilities of palm oil milling equipment. It is slated to be listed on the ACE Market on July 18.

Ecoscience managing director Wong Choi Ong said the RM5 million allocation for the establishment of a new fabrication facility and office in Indonesia is to shorten the group's response time to its Indonesian customers' requests as well as reduce shipping costs.

"With the increase in upstream activities and Indonesia being the world's largest palm oil producer, the move will put us in a stronger position to capitalise on the uptrend.

"Furthermore, having a fabrication facility in Indonesia also enhances the group's prospects in securing new contracts for the expansion or development of palm oil plants and facilities or other related sectors there," he added in a statement.

For FY21, Ecoscience posted a profit after tax of RM8.07 million compared with RM6.52 million for FY20, RM12.48 million for FY19 and RM7.74 million for FY18.

Revenue stood at RM153.16 million in FY21 versus RM153.69 million in FY20, RM170.93 million in FY19 and RM113.63 million in FY18.

Wong said Ecoscience's prospects remain bright in line with the resilience of the palm oil sector and the positive future of the industry underpinned by global consumption of crude palm oil growing at a compound annual growth rate of 2.5% between 2018 and 2020.

Ecoscience executive director Pan Kum Wan added that while the group faces rising cost of raw materials, this cost impact is mitigated as it locks in prices with its supplier when it tenders projects.

"Currently, the increase in the cost of raw materials, in terms of steel, has definitely affected our business. But when we tender our projects, normally we will talk to our supplier to lock up the price," he said during a press conference in conjunction with Ecoscience's prospectus launch.

Ecoscience head of finance Anson Sing Yun Xiang noted that steel — which it mainly uses to construct plants and facilities, and fabrication of equipment — formed over 20% of the group's cost component in 2021, and about 40% in 2020.

The company added that it had an unbilled order book of RM107 million as of May 27 — of which it expects to recognise RM70.1 million for the financial year ending Dec 31, 2022 (FY22), RM29.5 million in FY23 and RM7.4 million in FY24.

Ecoscience said it intends to recommend a dividend of at least 20% of its annual audited consolidated net profit.

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