Solar District Cooling Launches IPO, Subscription Opens on August 28

The public issue consists of 118,670,000 shares, allocated as follows:

– 21,192,000 new shares are available for application by the Malaysian public.

– 21,192,000 new shares are available for application by the company's eligible directors, employees, and persons who have contributed to the success of SDCG and its subsidiaries.

– 76,286,000 new shares are being offered by way of private placement to selected investors.

Solar District Cooling Group Berhad specializes in providing Building Management Systems (BMS), solar thermal systems, and energy-saving services. Its primary market is Malaysia, where it has a significant presence, contributing to a substantial portion of its total revenue. The company's distribution channels include indirect channels such as construction companies, facilities management companies, and concession companies, as well as direct channels targeting building owners and business operators.

BMS: The company's BMS services focus on integrating building facilities to provide automation and energy-saving services. This includes centralizing the management of various building systems such as air conditioning, lighting, elevators, escalators, electrical communication devices, process utilities, security, and building access. These systems are linked to an on-site centralized control room and, in some cases, connected to the company's command and control center at its headquarters in Kajang, Selangor.

Solar Thermal Systems and Energy Saving Services: This segment focuses on solar thermal hot water systems, primarily for heavy users of hot water such as hospitals. It also includes retrofitting fluorescent lighting to use LED lights to reduce fossil fuel and electricity consumption. The company's solar thermal hot water system uses sunlight directly to heat water, helping its customers save on energy and reduce their carbon footprint.

Maintenance of Other Systems and Equipment: In addition to BMS and solar thermal systems, the company also provides maintenance services for other systems and equipment, including gas-fired chillers and chilled water systems.

Solar District Cooling Group Berhad has shown a significant growth trend in total revenue over the past few years. From RM14,709 million in FY 2020 to RM26,622 million in FY 2023, it indicates that the company has been successful in business expansion and market performance during this period. Particularly in FY 2022, the company's revenue reached RM18,648 million, which is nearly 127% of the FY 2020 revenue. Moreover, the total revenue in FY 2023 increased by 43% compared to FY 2022, further confirming the company's strong growth momentum.

Looking at the business breakdown, the Building Management System (BMS) accounted for 73.94% of the company's total revenue in FY 2020 and 75.53% in FY 2023, showing that BMS is the main source of the company's revenue. The system integration service accounted for 61.13% of the share in FY 2020 but decreased to 66.04% in FY 2023, which may reflect changes in market demand for this service. The installation of solar thermal hot water and solar PV systems only accounted for 0.36% in FY 2020 but significantly increased to 16.44% in FY 2021, although it decreased in FY 2022 and FY 2023, which may be related to market fluctuations or the company's strategic adjustments. In addition, the revenue from maintenance services and other systems and equipment has remained relatively stable over these years, indicating that the company's business in these areas is stable.

The Building Management System (BMS) and solar thermal industry in Malaysia are integral components of the country's energy efficiency and renewable energy strategy. These sectors can be divided into several key areas based on their operations and service scope:

Development and Integration: This domain encompasses the design and development of BMS solutions for buildings, as well as the exploration and harnessing of solar thermal energy potential. It involves technological innovation and system integration to optimize building performance and energy usage.

Operation and Maintenance: This segment is responsible for the operation of BMS and solar systems, ensuring the stability and efficiency of the systems. It includes monitoring, troubleshooting, and regular maintenance to maintain optimal system performance.

Marketing and Sales: This aspect covers the promotion, sales, and end-user support and services of BMS and solar thermal products. It ensures that technological solutions meet consumer needs and achieve commercialization through effective market strategies.

The development of the BMS and solar thermal industries in Malaysia is influenced by national policies and incentives, especially in promoting green buildings and the use of renewable energy. The Malaysian government provides support for the development of these industries through various policies and programs, such as the Green Building Index (GBI) and the National Energy Transition Roadmap.

With the growing demand for energy efficiency and sustainability, it is expected that Malaysia's BMS and solar thermal industries will continue to expand. The government's capital expenditure (CAPEX) plays a crucial role in this process by investing in related projects and technology research and development, driving industry growth and innovation. In recent years, we have seen an increasing investment by the government in this field, and this trend is expected to continue in the coming years.

The Initial Public Offering (IPO) aims to raise a total of 45.095 million, with the proceeds allocated to several key strategic initiatives：

1. The expansion of the headquarters is expected to cost an estimated RM1.9 million, which represents 4.21% of the total proceeds, and is planned to be completed within 24 months.

2. Tendering bonds and/or performance bonds for future projects are expected to require an estimated RM5 million, accounting for 11.09% of the total proceeds, and are planned to be completed within 24 months.

3. The purchase of materials for the BMS segment, as well as solar thermal systems and energy-saving services segment, is anticipated to use an estimated RM18.7 million, constituting 41.47% of the total proceeds, with a completion plan within 36 months.

4. General working capital is expected to be allocated an estimated RM12.673 million, which is 28.10% of the total proceeds, and is intended to be utilized within a 36-month period.

5. Capital expenditure is projected to consume an estimated RM2.522 million, equivalent to 5.59% of the total proceeds, and is scheduled to be completed within 36 months.

6. Estimated listing expenses are anticipated to total an estimated RM4.3 million, or 9.54% of the total proceeds, and are expected to be incurred within a 3-month timeframe.