CBH Engineering Holding Berhad Launches IPO, Subscription Opens on 20th December 2024

CBH Engineering Holding Berhad is a leading electrical engineering service provider in Malaysia, with a track record of over 34 years in the M&E engineering industry. The company specializes in mechanical and electrical (M&E) engineering, focusing on the design, installation, testing, commissioning, and maintenance of high voltage (HV), medium voltage (MV), low voltage (LV), and extra low voltage (ELV) electrical systems. Additionally, CBH offers mechanical engineering services for building systems, including air conditioning, fire protection, plumbing, and renewable energy systems.

Primarily engaging as both a main contractor and a subcontractor for various M&E projects, CBH Engineering's customer base mainly consists of project owners and main contractors, holding a significant presence in the Malaysian market. The company has secured contracts with notable clients, including data centers and various commercial properties. As of November 25, 2024, CBH had 12 ongoing contracts valued at RM203.69 million, along with 22 additional tenders submitted, totaling RM559.71 million, which are currently under evaluation.

The company’s business model is as follows:

The estimated gross proceeds from the Public Issue of CBH Engineering Holding Berhad are approximately RM83.44 million, which will be allocated as follows:

Procurement of equipment and components for future projects: RM38.50 million (46.15%), intended to be utilized within a three-year period to support the expansion of the company's mechanical and electrical (M&E) engineering business.

Payment to subcontractors for future projects: RM18.48 million (22.15%), slated for use within 1.5 years to engage subcontractors for specific aspects of the company's M&E engineering projects.

Bank guarantees for future projects: RM17.30 million (20.73%), to be utilized within a three-year timeframe to provide bank guarantees for performance bonds and Letters of Credit required for the company's projects.

Recruitment of engineers and other personnel: RM3.46 million (4.14%), planned to be utilized within two years to strengthen the company's internal capabilities by hiring additional engineers and support staff.

- Estimated listing expenses: RM5.70 million(6.83%), to cover professional fees, underwriting and placement fees, printing and advertising costs, and miscellaneous expenses related to the listing process within 1 month.

CBH Engineering Holding Berhad has demonstrated significant financial growth over the past few years. The company's revenue increased from RM67.58 million in the financial year ending (FYE) 2021 to RM180.12 million in FYE 2022, marking a remarkable growth of 166.53%. This growth continued into FYE 2023, with revenue reaching RM207.95 million, representing a 15.45% increase from the previous year.

The company's gross profit (GP) also saw substantial increases, rising from RM12.14 million in FYE 2021 to RM41.49 million in FYE 2022, and further to RM67.31 million in FYE 2023. The GP margin improved significantly from 17.96% in FYE 2021 to 32.37% in FYE 2023, reflecting enhanced operational efficiency and effective cost management.

In terms of profitability, the profit before tax (PBT) rose from RM5.23 million in FYE 2021 to RM27.73 million in FYE 2022, and further to RM45.96 million in FYE 2023. The profit after tax (PAT) followed a similar trend, increasing from RM3.58 million in FYE 2021 to RM20.05 million in FYE 2022, and reaching RM33.05 million in FYE 2023.

The Mechanical and Electrical (M&E) engineering industry in Malaysia plays a vital role in supporting the residential, commercial, and industrial sectors. This industry encompasses a broad range of services, including the design, supply, installation, testing, commissioning, and maintenance of electrical systems across various voltage levels—high, medium, low, and extra-low—as well as building systems such as air conditioning and mechanical ventilation (ACMV), fire protection, plumbing, and renewable energy systems.

The M&E engineering industry in Malaysia has seen significant expansion, with its value growing at a CAGR of 17.0% from RM3.9 billion in 2019 to RM7.3 billion in 2023. Electrical engineering works jumped 19.7% CAGR to RM3.7 billion, and mechanical engineering works increased at a 14.4% CAGR to RM3.6 billion. Providence Strategic Partners forecasts the industry to reach RM10.6 billion by 2026, driven by rising property markets, end-user industry demands, and increased foreign and domestic investments, as well as the outsourcing of electrical and electronics manufacturing to Southeast Asia.

Public Issue of 298,000,000 New Ordinary Shares in CBH Engineering Holding Berhad ("Shares") in the following manner:

– 94,045,000 New Shares available for application by the Malaysian Public;

– 28,415,000 New Shares available for application by our Eligible Directors and Employees as well as persons who have contributed to the success of CBH and its Subsidiaries;

– 47,022,500 New Shares by way of Private Placement to selected Bumiputera Investors approved by the Ministry of Investment, Trade and Industry of Malaysia ("MITI");

– 128,517,500 New Shares by way of Private Placement to selected Investors;

Offer for Sale of 188,089,700 Existing Shares by way of Private Placement to selected Bumiputera Investors approved by the MITI.

1. Established Presence in M&E Engineering Industry: With approximately 34 years of experience in the M&E engineering industry in Malaysia, focusing primarily on electrical engineering works, the company has expanded its operations to include mechanical engineering works and civil and structural works. This broad service range has enabled the establishment of a strong presence in the industry.

2. Track Record of M&E Engineering Projects: Since 1990, the company has secured and completed several M&E engineering projects of varying scales and contract values, establishing a solid track record in delivering M&E engineering works and building a diverse portfolio of engineering projects.

3. Contracts to Sustain Near-Term Operations: The company's order book is contract-based, with 12 active contracts as of November 25, 2024, totaling an unbilled order book of RM203.69 million, which provides a solid foundation for near-term operations.

4. Experienced Management Team: The directors and key senior management team possess strong industry and functional expertise, with years of experience in their respective fields, contributing to the company's growth and active involvement in spearheading their departments.

1. Non-Recurring Projects: The company derives the majority of its revenue from non-recurring projects, which are awarded on a project-by-project basis. There is no guarantee of securing new projects of similar value and volume, which could affect the company's financial performance.

2. Dependency on Main Contractors: The company secures M&E engineering projects from main contractors on an invited tender basis. The ability to secure contracts depends on these main contractors inviting the company regularly to provide M&E engineering quotes.

3. Registrations and Licenses: The company is required to obtain and hold valid certificates of registration issued by the CIDB and Energy Commission Malaysia to operate its business. Failure to maintain or renew these could restrict or prohibit the company from providing M&E engineering services.

4. Cost Overruns: The company's contracts are generally determined on a fixed-price basis. There is no specific clause for price adjustment in the event of substantial increases in service costs, which could adversely impact the company's gross profit margin.

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