Glostrext opens on the ACE Market at RM0.65 per ordinary share, a premium of RM0.46 (242%) from its issue price of RM0.19 per share. The company which had successfully raised RM20.1 million under its listing exercise on the ACE Market of Bursa Malaysia Securities Berhad.
As part of its listing exercise, the existing shareholders of the Company also made an Offer for Sale of 16.3 million existing shares to selected investors by way of Private Placement.
Based on the enlarged share capital of 407 million shares, Glostrext is expected to have a market capitalisation of RM77.3 million after listing.
Glostrext Managing Director Dr Lee Sieng Kai said the company will leverage on its existing presence in Singapore to expand its service offerings in the country by offering real time structural and ground instrumentation and monitoring services using Glostrext WiNA platform as part of it business growth and expansion plans.
“In Singapore, growth in the government’s allocation for the transport subsector from S$5.33 billion in 2020 to a high of S$9.42 billion in 2023, of which more than 40% is allocated for expansion of rail network and related projects, serves as a strong base for continued demand for geotechnical instrumentation and testing services moving forward,” he said.
“Under the Building Control Regulations 2003, pile load testing is mandatory and geotechnical monitoring is required for all construction of buildings and infrastructure in Singapore. We believe that we will be well-positioned to benefit from these requirements to secure sales and further grow our business in Singapore,” Lee added.
As at 30 June 2023, Glostrext’s pile instrumentation and static load test services are mainly provided to customers in Singapore and Malaysia, while its structural and ground instrumentation and monitoring services are mainly provided to customers in Malaysia.
Based on the independent market research report by Smith Zander, the construction GDP growth is projected to increase by 6.1% in 2023 published by MoF in Feb 2023.
In Singapore, pile load testing for pilling activities and geotechnical monitoring are mandatory for all construction of buildings and infrastructure under the Building Control Regulations 2003, and will be driven by growth and development of the construction and infrastructure sectors.
“In recent years, the occurrence of landslides has become more frequent in Malaysia due to soil erosion caused by heavy and continuous rainfall. Hence, the awareness for geotechnical instrumentation and testing services is growing and will continue to drive the demand for geotechnical instrumentation and testing services in the long term,” said Malacca Securities in the recent Stock Digest.
Glostrext Berhad’s market share stood at 5.54% and 6.51% for Singapore and Malaysia, respectively. Glostrext recorded revenue of RM21.6m (-18.7% YoY) and its net profit fell 39.1% due to high base effect following the resumption of construction activities in FY22 and a slowdown in number of service engagement and lower revenue from the pile instrumentation and static load test services in Singapore.
By geographical location, Singapore remains the company’s largest revenue contributor for its geotechnical instrumentation service offerings, contributing RM4.60 million followed by RM1.81 million from Malaysia and RM0.02 million from Cambodia.
“However, we forecast Glostrext’s revenue to grow at 31.7% and 28.1% to RM28.5-RM36.5m for FY24-25f supported by RM8.9m unbilled orderbook and orderbook replenishment at RM24-32m for FY24-25f, respectively. Thus, we project its net profit to grow at a rate of 36.5-37.9% to RM5.6-7.7m for FY24-25f,” said the research house.
The group is exposed to foreign exchange risk where the bulk of its revenue is generated in SGD. Hence, any fluctuations in the exchange rates will affect the group’s financial results.
Any slowdown in economic activities and government initiatives may reduce the demand for property market and infrastructure development, translating to lower engagement for Glostrext services.
To recap, the company plans to use RM11.7 million (58.2%) raised from the initial public offering (IPO) to expand its structural and ground instrumentation and monitoring business into Singapore, as well as for working capital.
A further RM1.8 million (9.0%) of the proceeds will be used to fund the research and development activities to further enhance the automation and accuracy of its service offerings.
The remainder of the proceeds will be used to repay bank borrowings amounting to RM3.3 million (16.4%) and to defray the estimated listing expenses of RM3.3 million (16.4%).
Under the listing exercise, Glostrext is issuing 105.8 million new shares (“issue shares”), representing 26.0% of the enlarged share capital at an issue price of RM0.19 per share.
Of the 105.8 million issue shares, 20.4 million issue shares will be made available to the Malaysian public via balloting; 10.2 million issue shares for its eligible Directors and employees as well as persons who have contributed to the success of Glostrext under Pink Form Allocations, while the remaining 75.3 million issue shares are reserved for Private Placement to selected investors.
As part of its listing exercise, the existing shareholders of the Company will also make an Offer for Sale of 16.3 million existing shares to selected investors by way of Private Placement. M & A Securities Sdn Bhd is the Adviser, Sponsor, Underwriter and Placement Agent for the IPO exercise.