STEEL HAWK BERHAD launches IPO, Subscription Opens on August 16th

August 16th – SKHAWK (3049.MY) is set to make a market transition, moving its listing from the LEAP Market to the ACE Market of Bursa Malaysia Securities Berhad ("Bursa Securities"). Alongside this, the company will launch an initial public offering (IPO), with the subscription period open from August 16th to August 23rd. The shares are priced at RM0.15 each, and the new listing is expected to commence on September 5th.

This IPO involves issuing up to 134.7 million ordinary shares, including an offer for sale of 44.7 million existing shares, referred to as 'Offer Shares'. Additionally, there is a public issue of 90 million new shares, known as 'Issue Shares'. Out of these shares, the company plans an offering of 24.5 million shares to Malaysian public investors, 12.25 million shares to the company's directors, employees, and contributors, and an offering of 53.25 million shares to selected investors by way of private placement.

The company was incorporated in Malaysia on 29 December 2020 and currently operates as an investment holding entity. Through its subsidiaries, it is primarily engaged in providing onshore and offshore support services for the oil and gas (O&G) industry. The business is divided into the following core activities:

Engineering, procurement, construction, and commissioning (EPCC) services for chemical injection skids and the enhancement and upkeep of topside O&G facilities.

The installation and maintenance of oilfield equipment.

The supply of oilfield equipment.

The company is principally involved in the provision of onshore and offshore support services for the O&G industry. Based on the size of the OGSE industry in Malaysia of RM26.20 billion in 2023, Steel Hawk Group’s revenue of RM72.54 million for FYE 31 December 2023 represents a 0.28% market share of the OGSE industry in Malaysia in 2023.

The company's business activities are as follows:

The company has demonstrated impressive financial growth, with revenues soaring from RM24.85 million in FYE2021 to RM72.54 million in FYE2023. This surge reflects a compound annual growth rate (CAGR) of approximately 70.85%, underscoring the company's swift market expansion. Gross Profit (GP) has also seen a marked increase, jumping from RM10.82 million to RM20.83 million over the same period, with a CAGR of about 38.75%. This indicates a strong and efficient enhancement in profitability.

Operating Profit has experienced a robust rise, climbing from RM3.40 million to RM11.61 million, showcasing the company's solid operational performance and adept cost management alongside revenue growth.

Profit Before Tax (PBT) has mirrored this upward trend, escalating from RM3.14 million to RM10.34 million. Profit After Tax (PAT) for the company has significantly increased, from RM2.08 million in FYE2021 to RM7.22 million in FYE2023, illustrating the company's growing profitability.

Looking ahead to the financial period ending (FPE) 2024, the company is poised to sustain its financial momentum. With projected revenues of RM19.74 million, a Gross Profit (GP) of RM8.39 million, and a Profit Before Tax (PBT) of RM4.63 million. The Profit After Tax (PAT) is RM3.23 million, affirming the positive trajectory of the company's financial health.

The oil and gas industry is structured into three sectors:

Upstream: It includes exploring for and extracting oil and gas from both onshore and offshore fields.

Midstream: It is responsible for transporting crude oil and refined products to refineries and storage facilities.

Downstream: It encompasses refining crude oil, processing natural gas, and producing, marketing, and selling petroleum and petrochemical products to consumers.

OGSE encompasses the full range of products and services that cater to the oil and gas industry, from upstream to downstream. In Malaysia, it's categorized into two main types by PETRONAS: SWECs for services and SWECs for products.

The OGSE industry in Malaysia is largely shaped by the capital expenditure (CAPEX) of PETRONAS, the steward of the nation's petroleum resources. By allocating budgets for oil and gas projects, PETRONAS influences the industry's participation and revenue. In 2022, PETRONAS's CAPEX rose to RM18.60 billion, up from RM15.00 billion in the previous year, propelled by the Malaysian oil and gas sector's expansion. With a commitment to boosting and sustaining the country's oil and gas output, along with favorable crude oil price trends, PETRONAS's CAPEX is set to rise further. By 2024, it surged by 40.86% to RM26.20 billion and is anticipated to reach RM28.00 billion by 2028, reflecting a CAGR of 1.34%.

Based on the IPO Price of RM0.15, the total gross proceeds of RM13.50 million from the public issue will be used by the company in the following manner:

Construction of the Proposed Teluk Kalung Facility 2: The company intends to allocate RM7.00 million representing approximately 51.85% of its budget, construct the Proposed Teluk Kalung Facility 2 on part of the Teluk Kalung Land in order to expand fabrication capacity to approximately 65MT per month from the existing capacity of approximately 13MT per month, to cater for the expected increase in demand of products and services.

Working Capital: The company intends to allocate RM2.00 million representing approximately 14.81% of the gross proceeds from Public Issue to finance the company's expected future working capital requirement.

Repayment of bank borrowings: As at the LPD, the total outstanding amount of the company's borrowings stood at approximately RM27.60 million. The company intend to allocate RM1.00 million, which represents 7.41% of its budget, to partially reduce the bank borrowing.

Estimated expenses for the Transfer: The company intends to allocate RM3.5 million, which is about 25.93% of the total gross proceeds, to cover the estimated expenses for the Transfer.