Nestcon Berhad- Your Next IPO Opportunity

Introduction- Nestcon

Nestcon Berhad, a service provider in construction and infrastructure, is set to be listed on Bursa Malaysia's Ace Market by the end of June 2021. The company operates through its fully owned subsidiaries, Nestcon Builder and Nestcon Infra, focusing on civil engineering, infrastructure projects, and construction services.

Nestcon has been active in Malaysia's construction sector for a decade, with Nestcon Infra and Nestcon Builders being established in 2011 and 2014, respectively. Both subsidiaries are registered as Grade 7 (G7) contractors with the Construction Industry Development Board (CIDB) in the following categories:

• B04 (General Building Works)
• CE21 (General Civil Engineering Works)
• MiS (Mechanical Works)

Being classified as G7 contractors by CIDB, the highest level issued, enables us to handle projects of any magnitude and value throughout Malaysia. Furthermore, both subsidiaries are accredited as G7 contractors under the Sijil Perolehan Kontrak Kerajaan, fulfilling the Ministry of Finance, Malaysia's guidelines, allowing participation in government contracts.

Nestcon specializes in constructing:

•  A variety of buildings, including residential, commercial, industrial, and leisure properties.

• Diverse civil engineering and infrastructure projects, such as earthworks, drainage, and roadworks.

The following information about Nestcon Group's IPO is sourced from disclosures by the Malaysian Ministry of International Trade and Industry (MITI). 

• IPO Price Per Share: RM 0.28

• IPO Application Period: Begins on 8th June 2021 and ends on 15th June 2021

• IPO Listing Date: Scheduled for 30th June 2021

• IPO Listing Market: Ace Market

Nestcon's diluted Earnings Per Share (EPS) for the financial years ending 2017, 2018, and 2019 were recorded at 0.85 sen, 1.16 sen, and 2.27 sen, respectively. With the IPO price, Pekat’s Price-to-Earnings (P/E) Ratio stands at 12.33 times, which appears reasonable from my viewpoint.

Post-listing, Pekat Group's enlarged share capital is projected at approximately 643.82 million shares. This figure includes the issuance of 160.96 million new shares (25% of the enlarged capital) and an offer for sale of 32.19 million existing shares to selected investors through private placement.

Allocations of shares will be made as follows:

• Malaysian Public: 32.19 million shares

• Eligible Director/Employee/Contributor of Pekat: 32.19 million shares

• Selected Investors (including Bumi Investors approved by MITI): 96.57 million new shares

The funds raised from the Nestcon Group IPO are intended for various purposes, including:

• Establishing an in-house IBS Facility

• Acquiring new machinery and equipment

• Upgrading software and systems

• Repaying bank loans

• Providing working capital

• Covering estimated listing expenses

Nestcon Group has not disclosed any formal dividend policy in the initial IPO prospectus.

Lastly, the shareholding structure of Nestcon Group after the public offering is primarily comprised of four major stakeholders:

- Datuk Ir Dr. Lim Jee Gin (Managing Director) - 60%

- Ong Yong Chuan (Executive Director) - 10%

Together, these two individuals hold a total of 70% of Nestcon Group's enlarged share capital. They are restricted from selling or transferring their shares for a minimum of six months following the public offering.

Disclaimer: I am not responsible for any gain or loss in your investment.