Hydropipes Berhad IPO:
Hydropipes Berhad specializes in the fabrication of mild steel pipes and fittings, primarily serving the water reticulation industry.
Industry Growth: The demand for water infrastructure projects in Malaysia has been increasing over the past three to four years, driven by the government’s focus on addressing water infrastructure challenges.
IPO Details:
Purpose of IPO: The company aims to raise RM4 million through the issuance of 16 million new shares at RM0.25 per share. The funds are allocated as follows:
RM2 million for purchasing raw materials (steel).
RM1.2 million for working capital.
Financial Health:
Revenue: For the financial year ended December 31, 2023 (FY2023), the company reported a revenue of RM26.58 million, up from RM17.36 million in FY2022, marking a 53.15% increase.
Net Profit: Net profit rose by 70%, reaching RM2.15 million in FY2023 compared to RM1.26 million in the previous year.
Profit Margins: The net profit margin improved by 0.84% in FY2023.
Hydropipes operates at approximately 70% of its production capacity, indicating potential for increased output to meet rising demand.
Management Team:
Executive Director: Datuk David Ang Chin Tat leads the company, bringing extensive experience in the industry.
Recent Developments:
The past few years have seen a consistent rise in water infrastructure projects, aligning with Hydropipes’ business focus.
The IPO coincides with the government’s renewed focus on water infrastructure, positioning the company to capitalize on upcoming projects.
Hydropipes plans to utilize IPO proceeds to purchase 670 tonnes of hot rolled coil, potentially generating additional revenue of RM3.08 million.
Risk:
Dependence on steel prices and supply.
Potential delays in government infrastructure projects.
Competition from other pipe manufacturers.
Growth Strategy:
Increasing production capacity to meet rising demand.
Leveraging government initiatives in water infrastructure to secure new contracts.
Peer Comparison
Company P/E Ratio Revenue Growth Net Profit Margin
Hydropipes Berhad 15.3x 53.15% 8.1%
Engtex Group Bhd 29.6x N/A N/A
YLI Holdings Bhd 3.6x N/A N/A
Principal Adviser: Thinkat Advisory Sdn Bhd serves as the principal adviser for the IPO.
Concurrent IPOs
During the same period, other companies such as EPB Group Berhad and OB Holdings Berhad have launched their IPOs. The performance of these IPOs can provide insights into market sentiment and investor appetite. For instance, OB Holdings Berhad’s IPO was priced at RM0.24 per share, with analysts assigning a fair value of RM0.385, indicating a potential upside of 60.4%.
Implication for Hydropipes Berhad: The positive reception of recent IPOs suggests a favorable environment for new listings, which could bode well for Hydropipes Berhad’s debut.
Engtex Group Berhad ENGTEX +2.5% Engaged in water pipe manufacturing; recent uptick due to increased infrastructure projects.
YLI Holdings Berhad YLI +1.8% Involved in water-related products; positive movement aligning with sector growth.
Implication for Hydropipes Berhad: The upward trend in peer companies indicates a robust sector performance, suggesting that Hydropipes Berhad’s IPO could benefit from this positive momentum.
Hydropipes Berhad plans to raise RM4 million through its IPO by issuing 16 million new ordinary shares at an issue price of RM0.25 per share.
Implication for First-Day Performance: The modest size of the offering, combined with the company’s growth prospects, may lead to heightened demand and a favorable initial trading performance.
The Information Memorandum for Hydropipes Berhad’s IPO is available for download from
https://www.klsescreener.com/v2/announcements/view/7699361
In FY2023, the company reported a 70% increase in net profit to RM2.15 million and a 53.15% rise in revenue to RM26.58 million, indicating strong growth.
Use of Proceeds: Funds raised will be allocated towards purchasing raw materials and enhancing working capital, directly supporting operational expansion.
First-Day Trading Estimate:
Expected Price Range: RM0.27 to RM0.30 per share.
Performance Outlook: Given the company’s solid financials, sector demand, and strategic use of IPO proceeds, it’s anticipated that the stock will trade mildly above the IPO price on the first day.
Conclusion: Considering the favorable industry trends and the company’s growth trajectory, subscribing to Hydropipes Berhad’s IPO appears to be a prudent investment.
Thank you
