KUALA LUMPUR: Rubber processor and trader Seng Fong Holdings Bhd made a flat debut on the Main Market of Bursa Malaysia Securities Bhd this morning, opening at 75 sen, the same as its initial public offering (IPO) price.

Its chairman Ng Ah Bah @ Kok Yee highlighted that the listing provides the company the opportunity to realise its immediate objectives as well as investing in environmental, social, and governance (ESG) initiatives.

“Going forward, we will be well-positioned to capture opportunities arising from the increasing demand from our existing customers as well as from new customers as we ramp up production through the hiring of more people for a second shift and implementing ESG initiatives to make our business more sustainable.

“Building a sustainable business also requires the support of our shareholders. Thus, we intend to distribute at least 50% of our annual net profit as dividend to shareholders, subject to the approval of the board of directors and shareholders,” Ng said in a statement.

The demand for block rubber is driven by the automotive industry with about 70% of global natural rubber being used for tyre manufacturing. Going forward, the global vehicle sector is anticipated to grow at a five-year (2021 to 2025) compound annual growth rate (CAGR) of 7.03% to 105 million units.

Seng Fong is raising RM68.1 million from the IPO. From the proceeds, RM19.7 million has been allocated for working capital requirements including purchase of raw materials and the hiring of additional workers; RM37.9 million for the repayment of bank borrowings that include the partial funding for the solar system units, RM6.3 million to fund the installation of the biomass system units and RM4.2 million for listing expenses.

Additionally, the installation of the solar system is estimated to achieve cost-savings of about RM2.6 million per annum from electricity costs and a further RM3.5 million per annum from diesel costs through the installation of the biomass system.

For the financial year ended June 30 2021, the company’s export market share of block rubber stood at 11.8% based on its export output of 121,404 metric tonnes (MTS) against the country’s total export volume for block rubber of 1.03 million MTS in 2021. Its revenue is almost entirely derived from exports, with the primary markets being China, Hong Kong, Singapore and Taiwan.

The company said the block rubber which it produces, are sold directly to end-user customers where the majority are tyre manufacturers and it is also sold to international rubber traders. Meanwhile, the block rubbers which are sourced from international rubber traders or natural rubber processors for trading purposes are sold to tyre manufacturers.

Upon listing, the company’s has a market capitalisation of RM389.22 million.

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