[Construction Stock] Siab Holdings | 12Invest
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Stock Price (2024/06/05): RM0.130
P/E: -9.18 (cannot be counted due to losses in the previous quarter)
Dividend Ratio: N/A
NTA: RM0.070
Note: Before entering the main text, I want to tell readers that Siab Holdings Berhad (SIAB, 0241) has recently been working on additional shares (“Rights Issue”). The overall structure is relatively complicated. In fact, it was also because they invested in the company for a friend that the moderator specifically explained their additional share operations, so keep in mind that investing is risky!
First, let me introduce that SIAB's main business is construction, and the industries they build include the residential industry we live in and the industry we don't live in (collectively, “Non-Residential”); some of the more well-known projects SIAB has participated in in the past include Quayside Mall, F&N Intelligent Industrial Building, Hospital Bentong, and Menara LGB et al.
Well, I believe the construction industry is also relatively easy for everyone to understand; in fact, construction companies mainly bid for new projects, obtain projects, prepare for construction, and deliver projects on time; otherwise, they will receive default compensation (“LAD”).
Well, SIAB, a construction company, went public in February 2022, when Covid was just beginning to recover, but unfortunately, due to the impact of Covid, such as labor shortages, rising raw material prices (you know, the value of the projects won usually not change), etc., the company lost money on both FY2022 and FY2023.
So, in the past, the market generally didn't pay much attention to this company.
But next, maybe SIAB can complete the act of drawing money from the bottom of the pot...
First, in FY2024 Q1, we can see that SIAB finally turned a loss into a profit after 2 fiscal years; according to some friends in the industry, construction companies lose money, often because of specific projects (commonly known as “Legacy Projects”), and SIAB's next construction orders (“Orderbook”) are also relatively new, and the old ones have already been completed, so there should be no loss in the future.
Second, the company will make a large additional stock next, with a scale of around RM92.0 million, and this is actually the focus of our discussion today:
Next, SIAB will issue 13 new ancillary shares for every 10 shares. The price for each subscription is RM0.120, and for every 2 additional shares subscribed, 1 share voucher (“Voucher”) will be sent; it might be confusing. The moderator will use 100,000 as an example:
Parent shares of the original SIAB: 100,000 shares
Additional shares available for subscription: 130,000 shares
Cost: RM15,600 (in 130,000 shares * RM0.120)
Total number of new SIAB shares: 230,000 shares
Free vouchers*: 65,000 shares
By the way, if SIAB's free vouchers are to be exchanged for parent shares, the conversion price is RM0.200. In other words, if the person with the most vouchers wants to arbitrage, the primary condition is that the SIAB parent stock price must exceed RM0.200...
As to who holds the most vouchers... You know it~
So what does SIAB actually need to finance that much money to do?
In fact, the core of the entire issuance of additional shares was the acquisition of another very strong construction company, Taghill Sdn. Bhd. (“Taghill”).
Taghill's construction business is about the same as SIAB, and both residential and non-residential we live in; the highlight of this company is that they have a RM1.6 billion construction order on hand, and if we add SIAB's RM314.5 million, the total value is close to RM2.0 billion.
Moreover, Taghill will also provide a profit guarantee (“Profit Guarantee”); within two years of FY2024 and FY2025, they must reach a profit after tax (“PAT”) of RM24.0 million, which means that the average annual bottom is around RM12.0 million. Coupled with SIAB's own profit, I believe it will improve a lot from the previous situation.
The third point is to take a closer look at the information uncovered by Taghill's customer base; we have just mentioned that Taghill has quite a few orders, the most critical of which are these customers, including Ivory Interpoint Sdn. Bhd. (“Ivory”), Exsim Macalister Sdn. Bhd. , Binastra Builders Sdn. Bhd. , and Exsim Noordin Sdn. Bhd. etc.
If you are a CTOS reader, you can go buy the report and take a look at Ivory's shareholders. Otherwise, you can just look at Exsim. Recently, Exsim has also acquired a listed company, so you can take a look at their trends...
One last point, which I personally think is the most important point, is that SIAB's additional shares will be sold by M&A Securities Sdn. Bhd. (“M&A”) and NewParadigm Securities Sdn. Bhd. (“NewParadigm”) Fully contracted, which means that the additional shares have already been contracted.
The situation where ancillary shares are “sold out” by investment banks is indeed rare in the market, so the biggest question is, which interested party will complete these additional shares?
This, I believe, is quite intriguing...
Anyway, the moderators personally think that SIAB's operation should be good for their long-term development, but investment is also always risky. After reading it, please judge the risks and benefits yourself. Sekian Terima Kasih!
Photo Credit: Taken from Siab Holdings Berhad website
Disclaimers:
The moderators are not licensed stock analysts, so we don't provide any trading advice. If necessary, you can ask a licensed stock analyst or licensed stock broker.
The current status of the moderator is iFAST Capital Sdn. Bhd. He is also the Marketing Representative of TA Securities Holdings Berhad, and is an independent financial content writer and provides financial advisory services.
At the time of writing this article, or in the short term (within 3 months), the moderator itself was not interested in investing in or holding the company mentioned above, unless new factors came up, so it is important for readers to check the independence of this content.
Finally, the content shared above is all information, news, and content obtained by individuals through various channels; all content mentioned in the article can only be used for reference, study, education, and information purposes, and is by no means any professional financial, investment, or trading advice. If you want trading advice, please consult a professional stock analyst or investment bank, and then judge the risks and potential benefits yourself. I would like to state once again that 12Invest is in no way responsible for the accuracy, completeness, correctness, or validity of any content or opinions shared. All decisions made after reading the article are the responsibility of the readers themselves. Remember, any investment involves risk, so take steps to protect yourself.
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