IPO ... ABM Fujiya Bhd

It sees an automotive battery manufacturer, sees huge opportunities in exports on the back of a recovering economy and the elimination of tariffs on the regional trade of automotive parts starting 2010 under the Asean Free Trade Agreement (Afta).

Overseas markets contributed 47.5% to ABM Fujiya’s total revenue of RM126 million for FY09 ended Dec 31. Its net profit amounted to RM8.5 million in the financial year under review, which translates into a net profit margin of 6.75%, slightly lower than its direct peer such as Yokohama Industries Bhd of 8.08% for FY09 ended Dec 31.

ABM Fujiya’s initial public offering (IPO) comprises a public issuance of 23 million new shares at 50 sen each and nine million existing shares offered for sale by existing shareholders. The total paid-up share capital upon listing will be 180 million shares.

Of the 32 million IPO shares, 4.5 million shares will be reserved for eligible directors, employees and business associates of the company and its subsidiaries, 10.5 million shares for the public (at least 50% for bumiputra investors) and 17 million for Malaysian and foreign institutional and selected investors as well as bumiputra investors approved by the International Trade and Industry Ministry.

The group would use the proceeds for working capital purposes and expansion of product ranges as well as its market reach.

Other battery manufacturers could serve as a guide as to how much ABM Fujiya will be valued. Direct peer such as Yokohama is currently (Jan 2011) trading at a price to earnings ratio of 6.4 times. The counter hit a 52-week high of 80 sen on Sept 29, 2010 while its low was 54 sen on Feb 3, 2010. Its dividend yield amounted to 3.68% based on yesterday’s trading price of 68 sen at press time.

Applying a 6.4 times price-earnings multiple on ABM Fujiya’s FY09 net profit of RM8.5 million, the company will have a market capitalisation of at least RM54.4 million.

ABM Fujiya currently operates three plants with a total production capacity of 1.6 million batteries a year. This accounted for 40.9% of Malaysia’s total exports of lead acid batteries in 2009.

Established in 1974, the company produces conventional lead acid battery, low maintenance battery, deep cycle battery, marine application battery and MF battery with 13 brands registered.