IPO: Kawan Renergy Enters Ace Market Surging 50% Higher At 45 Sen

Kawan Renergy Berhad’s stock rose 50% on its entrance on Bursa Malaysia’s Ace Market via its initial public offering (IPO) today.

Kawan Renergy opened at 45 sen versus its IPO price of 30 sen per share. At 9.40am, the counter reach a high of 47 sen before tapering to 44 sen with some 87 034 300 share changing hands.

High demand from investors was seen on the counter as its IPO was oversubscribed by 94.99 times, with the Bumiputera portion oversubscribed by 83.12 times, and the other public category saw an oversubscription rate of 106.86 times.

Kawan Renergy aims to have a market capitalisation of approximately RM165.0 million, calculated based on the issued price of RM0.30 per share and the enlarged issued share capital of 550.0 million shares.

Kawan Renergy’s Managing Director, Ir. Lim Thou Lai said, “We see significant potential in the demand for renewable energy and co-generation plants, in line with Malaysia’s national energy transition ambitions to achieve net-zero emissions by 2050. Our proven track record in successfully completing energy efficiency projects position us strongly to capitalise on these growing opportunities.”

“The additional capital raised from the IPO will be instrumental in fuelling our growth strategies and enable us to seize exciting opportunities within the flourishing industrial process equipment industry. Our expansion is strategically aligned with the growth of the Malaysian economy, which is buoyed by increasing foreign direct investment (FDI) in key industries we serve such as oleochemical, food, water & waste treatment, biofuels, power generation, oil and gas, etc.”

Kawan Renergy reported robust financial results for the first quarter ended 31 January 2024 (1QFY24). The Company reported revenue of RM19.9 million and net profit of RM4.2 million, achieving a net profit margin of 21.1%.

Over half of the revenue, RM11.2 million or 56.5% came from the Industrial Process Equipment segment. The Process Plants and Renewable Energy & Co-generation Plant segments contributed RM5.8 million and RM2.9 million respectively, accounting for 28.9% and 14.4% of total revenue. The balance was contributed by the Power Generation & Sales of Electricity segment, making up 0.2% of total revenue.

“Present contribution from the Renewable Power Generation & Sales of Electricity segment is currently minor, we are determined in expanding this segment by enhancing our portfolio of recurring income sources,” Ir. Lim concluded.

As at 31 January 2024, the Group’s cash and short-term deposits stood at RM50.2 million, compared to total borrowings of RM10.5 million.

Out of the RM33.0 million raised from the IPO, the Group has allocated RM15.0 million (or 45.5% of the proceeds) as working capital for on-going and future co-generation plant projects. Additionally, RM5.0 million (15.1%) has been set aside for the investment in a new 2-Megawatt (MW) biomass power plant. A further RM2.5 million (7.6%) has been allocated to improve the output of its Bercham plant, a 1-MW landfill biogas power plant. The Group will also utilise RM0.5 million (1.5%) for the purchase of additional machinery to improve efficiency. The remaining proceeds are earmarked for repayment of bank borrowings and estimated listing expenses.

M & A Securities Sdn Bhd is the Principal Adviser, Sponsor, Underwriter and Placement Agent for the IPO exercise.

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