Wednesday, June 9, 2010

Tatt Giap to market products, services for specific industries

KUALA LUMPUR: Tatt Giap Group Bhd (TGG), en route to a listing on the Main Market of Bursa Malaysia Securities Bhd next month, plans to market products and services catering to specific industries to increase its market share in steel processing.

According to its prospectus exposure posted on the Securities Commission (SC) website on Tuesday, June 8, Tatt Giap'' has identified several industries including automotive, electrical and electronics (E&E) and furniture as potential markets for expansion.

The group would tap into its network and contracts built up over the years to further penetrate these markets.

"We intend to build on existing relationships by supplying special grades of steel to certain customers in these industries and secure long-term contracts for supply of all steel products required by them," it said.

Primarily engaged in manufacturing and trading of stainless steel and steel-related products, Tatt Giap Group also plans in the longer term to market to the Middle East, Australasia and European regions, and to countries in Asean which it has yet to serve.

Tatt Giap said it had made trade visits to potential customers in countries such as New Zealand and South Africa and in the Middle East and Europe, adding the group would embark on international product road shows and participate in steel-related exhibitions to promote its products.

To date, the group exports to India, Singapore, Indonesia, Brunei. Vietnam, Thailand, the Philippines, US and Australia.

On downstream product expansion, Tatt Giap said it had identified the production of stainless steel pipe fittings and metal parts. It added that such products enabled it to cater to users in the industrial, automotive, E&E, and building and CONSTRUCTION [] sectors.

"We are currently proactively trying to penetrate into this market to meet our planned expansion into the production of these fittings within the next three years," noted the group.

Under its listing exercise, Tatt Giap is making a public issue of 14.56 million new shares of 50 sen each at 58 sen apiece. This comprises six million shares to the Malaysian public, two million shares to the group's directors and employees and the balance of 6.56 million shares for private placement to identified investors.

The group said of the total gross proceeds of RM8.445 million, RM5.945 million would be utilised for repayment of term loan borrowings and the remainder of RM2.5 million for estimated listing expenses.

Tatt Giap's vendors are also making an offer for sale of 14.2 million vendor shares of 50 sen each which would be offered collectively by its major shareholders Giapxin Sdn Bhd (GSB) and Perbadanan Nasional Bhd (PNS) at 58 sen apiece.

The Penang-based group, which has over 20 years experience in steel processing, said the overall production of cold drawn steel bars, polished carbon steel bars and stainless steel bars was about 8,700 tonnes per annum and the group's electro-galvanising (EG) line had a capacity of 120,000 tonnes of EG steel coils per annum.

The group's order book was about RM50.59 million as at April 30, 2010. As at April 30, Tatt Giap total current assets totalled RM180.91 million.

For the year ended Dec 31, 2009 (FY09), Tatt Giap's net profit rose 76.61% to RM6.87 million from RM3.89 million in FY08 due to higher gross margins.

FY09 earnings per share stood at 6.73 sen, based on an enlarged share capital of 102 million shares. It said its effective tax rate for FY09 was 34.42%, which was higher than the statutory tax rate of 25% due to deferred tax assets not recognised.

The pro-forma NTA is RM1.18 sen per share. At the IPO price of 58 sen, the stock is valued at a historical price-to-earnings ratio of 8.6 times for FY09 and 0.49 times NTA.

The group registered a lower revenue of RM225.37 million in FY09, down 17.33% from RM272.6 million in FY08 due mainly to lower steel prices.

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