Nothing gets the blood of an ardent investor pumping like the prospect of a new IPO which clearly indicates
huge market demands. In this case, we are talking about Hiap Huat Holdings Berhad , which recently saw an oversubscription of its public portion of 5 million shares by a whopping
136.10 times. For those of you who managed to get a piece of the pie, some decent 'ANG POW' money should be going into your pocket next week. Fret not for others as there are ample opportunities to pick up from the market when it opens.
In this article, we will look at some salient points into the company's business as well as its future plans, which should also shed some light to the reason behind such strong interest in its IPO.
Hiap Huat’s principal activity is in the niche business of collecting, recycling, re-refining and producing recycled products from waste oil, waste solvent and used drums and containers that they are licensed to collect, treat and process. It boast a 17 years proven track record in the oil recycling industry and is recognized as the top 3 major players (by way of revenue) in Malaysia in year 2011. The group's recycled end products are sold under their own "AF1", "Top Up", "NEKKO", "Cap Rumah" and "Flag" brand names, contributing about 82% of the Groups Financial Period Ended 2012 revenue.
The Group was recognized and awarded an accredition by Moody's International Certification.
The Group has 8 wholly owned subsidiaries under its umbrella, namely, Hiap Huat Chemicals Sdn Bhd, Transada Chemicals Sdn Bhd, Topmark Petroleum Products Sdn Bhd, Xia Fa Hardware Sdn Bhd, CNT Hardware and Petroleum Sdn Bhd, Hiap Huat Petroleum Sdn Bhd, Hiap Huat Services Sdn Bhd and Hiap Huat Chemicals (Labuan) Sdn Bhd. It has its headquarters located centrally in Kepong, Selangor and has 2 treatment plants located in Bentong, Pahang and Gopeng, Perak, with total existing capacity of 51 million litres for waste oil and 15 million litres for waste solvent. It had also invested some RM25 million to setup the thrid treatment plant in Pulau Indah, Westport which is expected to start production in the first quarter of next year. Mr Chan Say Hwa, the Group Managing Director indicated that with the introduction of the third treatment plant, the production capacity should be doubled and also hope to increase the Group's market share which currently stands at about 20% to 26%.
Zulkifly Zakaria, Hiap Huat's independent non-executive chairman, said in his speech at the prospectus launch, “We have always capitalised on our ability to identify the potential in the oil recycling industry and this makes us different from our peers. Today, Hiap Huat has grown into one of the few businesses in the oil recycling industry that is equipped with the capabilities to produce and market finished recycled products that can be directly used by end consumers. This success further reinforces our strength as an integrated licensed waste oil recycler.”
As to the Financials, the Group posted a healthy Profit After Tax (PAT) of RM2.74 million against a revenue of RM18.285 million FPE 2012 with an indicative Gross Profit Margin of 41.52% and a PAT of 14.99%. The main revenue contributors (more than 50%) are from recycled fuel oil and recycled lubricant products with 95% of the revenue predominantly derived from Malaysia.
Moving forward, the Group had also identified several key strategic initiatives that it will implement post listing to support its future growth plans.
1.. Increase in Production Capacities
2. Expanding & Reinforcing the Group's Supply Chain
3. Setting up of Pulau Indah Production Plant to be completed and operational by 1st quarter of 2013
4. Oversea Market expansion to Indonesia, Vietnam, Myanmar and Indonesia
The Group is expected to raise a gross proceed of 17 million for its public issue. The proceeds are expected to be utilized in the following manner.
The Major Shareholders are :
Chan Say Hwa - 20.82 %
Soo Kit Lin - 20.82%
Chan Ban Hin - 17.85%
Hiap Huat will have a market capitalization of RM66,660,266 upon listing, based on a total enlarge issue of 333,301,330 shares at RM0.20 per share.
I have a good gut feeling that the stock will show a strong debut on its listing day, in consideration of the following factors :
a) Hiap Huat has a proven track record of 17 years and is ranked among the top 3 major players in the oil recycling industry in Malaysia in 2011 in terms of revenue
b) 90+% of the Group's revenue is currently derived from Malaysia. With the oversea's expansion plan, we can look forward to a substancial increase in revenue and profit in the near future.
c) a strong Management team with expertise in oil-recycling business
d) massive oversubscription of its public share offering
The stock will be listed on
26th Nov 2012 under the stock name
HHHCORP.
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