Following the relisting of Maxis Bhd last November, another previously privatised company is making a comeback to the local bourse, which has seen a trend of companies being privatised at relatively low prices, only to be relisted later at better values.
GW Plastics Holdings Bhd, previously known as Great Wall Plastic Industries Bhd, plans to raise RM12.2 million via its proposed initial public offering (IPO), with the relisting on Bursa Malaysia’s Main Market scheduled for the fourth quarter of this year.
The manufacturer of plastic film packaging products was first listed on the local bourse in 1995.
Following a takeover in 2003, the plastic operations were sold off and Great Wall Plastic Industries (GWPI) morphed into property developer Encorp Bhd, which is today synonymous with the development of The Strand in Kota Damansara and the teachers’ quarters concession.
The plastic operations under GWPI were disposed of by Encorp in two tranches at relatively low prices, according to announcements made to Bursa Malaysia.
In October 2004, Encorp sold the first tranche, comprising 51% of the previously wholly-owned subsidiary, for RM45 million. At the time the transaction was proposed in 2003, Encorp said the price represented a net price-earnings multiple of 16.61 times for 2002 earnings and a price to NTA multiple of 0.69 times.
In November 2006, Encorp entered into an agreement to sell the remaining 49% of GWPI to Keybumi Sdn Bhd for RM40 million. The transaction was completed in January 2007.
Encorp had said then that for the year ended Dec 31, 2005, GWPI posted a net profit of RM9.99 million and had net tangible assets of RM139.96 million. The net profit and NTA attributable to the sale shares were RM4.89 million and RM68.58 million, respectively. Thus, the sale price was at a price-earnings multiple of 8.17 times and a price-to-NTA ratio of 0.58 times.
Great Wall’s new beginning
It is unclear how much GW Plastics will be valued at. Nonetheless, IPOs are hardly ever priced below NTA, which was what GWPI was sold for. This suggests that its shareholders, who acquired the last 49% block at just 0.58 times NTA some three years ago, are likely to benefit substantially from the IPO.
In a statement yesterday, GW Plastics said its forthcoming IPO entailed a public issue of 16 million new ordinary shares and an offer-for-sale of 45.42 million vendor shares at an issue price of 76 sen apiece.
Of the public issue, 11.8 million shares are for public subscription while 17.82 million shares will be for private placement to selected investors.
Additionally, 8.2 million shares are available to eligible directors, employees and business associates of GW Plastics and its subsidiaries.
Another 23.6 million shares would be placed out to bumiputera investors approved by the Ministry of International Trade and Industry.
RHB Investment Bank Bhd is the adviser, sole underwriter and sole placement agent for the exercise.
It was reported earlier that the major shareholders selling a portion of their shares are the company’s CEO Lim Kok Boon (selling 1.62 million shares), Yeoh Soo Ann (5.67 million shares) and Keybumi Sdn Bhd (38.13 million shares).
The funds raised would be used to expand and add value to its range of products, increase capacity by acquiring new facilities and to expand into new markets like China, the US, Russia and Africa.
“Our forthcoming listing is a reflection of our scale of operations, which will also enhance the group’s profile as a premium player in the region,” Lim said in a statement yesterday.
The listing could prove timely as plastic packaging-related stocks have seen renewed investor interest. Year-to-date, Tomypak Holdings Bhd has surged 80.64%, CI Holdings Bhd has risen 63.74% while Daibochi Plastic and Packaging Industry Bhd and Advanced Packaging Technology (M) Bhd have each gained 30%, also partly helped by increased interest in the food and beverage (F&B) sector.
In a recent report, CIMB Research said YTD, the share prices of the F&B and plastic packaging stocks have shot up 65% on average compared to 9.6% for the FTSE Bursa Small Cap Index. Moreover, these stocks are also trading at only five to eight times CY2011 price-to-earnings ratio, providing a cheaper alternative to the F&B sector.
But unlike Daibochi and Tomypak, which can count on some 90% of their revenue coming from the F&B sector, GW Plastics has a more diversified product portfolio, as its products are used in sectors such as logistics, industrial and petrochemicals.
Its products extend to stretch films, which are used to wrap products stored in inventory and during transportation. In the petrochemical industry, its shrink hoods are used to bundle pallets such as bags of resins.
For its financial year ended Dec 31, 2009, GW Plastics posted a net profit of RM15.3 million on the back of RM255.5 million in revenue. Exports sales increased to 52% last year from 32% in 2004.
For export markets, Japan is the largest contributor accounting for 16.6% of sales, followed by Singapore at 10.4% and South Korea at 6.6%. Other overseas markets include Australia, New Zealand, Europe, Mexico, and Hong Kong.
The company’s main customers include Exxonmobil Chemical Asia Pacific, Nippon Kompo Shizai Co Ltd, Gardenia Bakeries (KL) Sdn Bhd, Malayan Sugar Manufacturing Co Bhd, Malaysian Packaging Industry Bhd, and ABC Tissue Products Pte Ltd.
This article appeared in The Edge Financial Daily, September 8 2010.
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