Wong Fong Industries launched its initial public offering (IPO) for listing on the Singapore Exchange's Catalist board yesterday.
The home-grown transport engineering firm is issuing 43 million new shares at 23 cents apiece - raising a total of $8 million in net proceeds. This puts its market capitalisation at around $54.1 million.
The placement is priced at a price-earnings ratio of 7.9 times, based on the group's historical earnings per share of 2.9 cents for the 2015 financial year.
The placement will close at 12pm on July 26, with trading expected to commence at 9am on July 28.
Wong Fong's offering is the latest in an increasingly hot IPO scene. Three other firms - United Global, Procurri Corporation and Katrina Group - launched their IPOs just this month alone, with EC World Reit's offering in the pipeline.
Wong Fong, which was set up in 1964 as a truck equipment servicing workshop, operates four complementary businesses: equipment sales (ranging from load handling systems to truck-mounted cranes); projects (customised vehicles, including those for military and civil defence); repairs and servicing; as well as training courses.
It's been a challenging environment (for us) these two years. But the good thing is, when the water is low, everything else is also low. So it's a good time for us to make more investments. ''
EXECUTIVE DIRECTOR ERIC LEW, referring to the tepid pace at which Singapore's economy has been growing.
The group has a presence in Singapore, Malaysia and China, counting among its customers government agencies as well as companies across industries such as infrastructure development, logistics, waste management and defence.
Executive director Eric Lew told a briefing yesterday that the company expects to see healthy demand from both the local construction and logistics industries in the coming years, driven largely by Government spending.
The growth in demand will also be supported by the Government's new Automation Support Package, which will spur small and medium firms to invest more equipment to improve productivity, he noted.
To meet growing demand, more than a quarter of the IPO's net proceeds will go towards mergers and acquisitions, joint ventures or strategic collaborations. These will help expand and diversify operations and product offerings, said Mr Lew, adding that the group is in talks with a few engineering and training-related companies.
"It's been a challenging environment (for us) these two years," he said, referring to the tepid pace at which Singapore's economy has been growing.
"But the good thing is, when the water is low, everything else is also low. So it's a good time for us to make more investments."
Mr Lew also said the company plans to either expand its facilities or acquire or lease larger manufacturing premises as well as develop new products and services.
He added that the group plans to pay dividends of at least 20 per cent of its overall net profit in the 2016 and 2017 fiscal year.
Wong Fong recorded a turnover of $77.6 million and net profit of $5.6 million last year, up from the revenue of $75.9 million and earnings of $5.3 million in 2013. Its order book stands at around $42 million as at June 15.
KGI Fraser Securities trading strategist Nicholas Teo said the recent spate of IPO launches has "breathed some life" into the market again, which could relieve pent-up demand among investors.
But he is hesitant to call this a turn for the better, given that there has been a simultaneous "negative momentum" of companies delisting, such as Osim International and Neptune Orient Lines. "I'm not sure if we're really seeing things take a positive turn. The challenge remains (for Singapore) to attract good listings for the long haul."
Religare Capital Markets has put out a "do not participate" call for the upcoming IPO of EC World Reit, a Chinese logistics-focused real estate investment trust (Reit), as the "downside risks to owning the Reit is high and the low yield does not compensate for these risks".
It noted that the weakening supply and demand situation for steel, for instance, may affect the long- term growth prospects of Chongxian Port Investment, which makes up a third of the Reit's valuation.