This article first appeared in Capital, The Edge Malaysia Weekly on May 5, 2025 - May 11, 2025

BURSA Malaysia’s ACE Market, which saw three underwhelming listings in April amid heightened risk aversion due to the US’ reciprocal tariffs, is set to see the debut of two more companies this week.

Engineering firm West River Bhd ­(KL:WESTRVR) is scheduled to hit the listing gong on Monday (May 5), while geotechnical services provider Fibromat (M) Bhd (KL:FIBRO) is transferring its listing from the LEAP Market on Thursday (May 8). (See “Fibromat ups capacity to gain more ground with ACE Market transfer” on Page 37.)

Speciality chemicals manufacturer Sumisaujana Group Bhd (KL:SUMI) closed 25% or six sen below its IPO price of 24 sen on April 9, while autoparts distributor MSB Global Group Bhd (KL:MSB) closed 15% or three sen shy of its IPO price of 20 sen on April 15. Shares of WTEC Group Bhd ­(KL:WTEC), which manufactures foam and fabric products, closed 1.5 sen or 6% below its IPO price of 25 sen on April 29.

West River is raising RM27.9 million from selling 71.54 million new shares at 39 sen each. The public portion of 17.89 million shares were only oversubscribed by 0.26 times.

Its promoter and largest shareholder, Neutron Capital Sdn Bhd — which is fully controlled by West River managing director Lim Yong Lai — will hold 49% of West River following the IPO and offer for sale of 35.77 million shares (10% of the enlarged share capital of 357.7 million shares) that will gross as much as RM13.95 million. Lim, however, will still control 70% of West River with a direct 21% stake on top of the 49% stake via Neutron Capital.

Giving West River a market capitalisation of RM139.5 million, the IPO price of 39 sen is 12.2 times its earnings per share of 3.2 sen for the financial year ended Dec 31, 2024 (FY2024).

West River specialises in mechanical and electrical (M&E) engineering, air conditioning and ventilation systems, and building solutions catered for various sectors, including commercial, industrial and infrastructure industries.

Some RM10 million or 35.8% of the IPO proceeds has been earmarked for the purchase of land and the construction of a new manufacturing factory and warehouse with a built-up area of about 35,000 sq ft within 36 months. This will allow the group to have sufficient space to carry out its manufacturing activities and to better organise the storage of its M&E engineering project-­related inventories, such as cables, wires and spare parts.

Another RM5.6 million (20.07%) has been allocated for the repayment of borrowings, leaving RM7.8 million (27.96%) for general working capital after deducting listing expenses of RM4.5 million (16.13%).

M&A Securities is the principal adviser, sponsor, underwriter and placement agent for West River’s IPO.

For FY2024, West River posted a higher net profit of RM11.46 million against RM10.24 million in FY2023 and RM5.96 million in FY2022. Net profit margins improved from 7.15% in FY2022 to 8.18% in FY2023 and 9.34% in FY2024.

TA Securities valued West River at 45 sen per share, based on a target price-earnings ratio (PER) of 11 times applied to its projected CY2025 earnings per share of 4.1 sen.

“The target PER reflects a 10% discount to the average one-year forward PER of peers, which we view as reasonable given West River’s smaller market capitalisation, despite its stronger ROE (return on equity) relative to peers,” it said in an April 16 note.

The research firm expects West River to register core earnings growth of 23.4%, 11% and 2% to RM14.5 million, RM16.1 million and RM16.4 million for FY2025, FY2026 and FY2027 respectively. This growth is mainly driven by an unbilled order book of RM247.3 million as at March 2025; new job replenishment of RM100 million for FY2025 and RM150 million for FY2026 and FY2027; and a 15% annual growth rate for its manufacturing division.

Apex Securities, in an April 17 note, said West River’s projected core earnings are expected to demonstrate stable growth, with a two-year compound annual growth rate of 38.7%, driven by an expanding order book and improved margins from new projects and manufacturing operations. The group has submitted tenders for 101 projects valued at RM1.03 billion, primarily in Selangor and Kuala Lumpur with an expected win rate of 9%.

On a pro-forma basis, the group’s financial position is expected to improve from a net debt position of RM3.3 million as at end-FY2024 to a net cash position of RM20.9 million post-listing, following the utilisation of fresh proceeds amounting to RM27.9 million.

While West River does not have a formal dividend policy, TA Securities said a fair dividend payout assumption of 20% is justified, supported by anticipated stable earnings growth and positive operating cash flow over the next few years. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.