Federal Int'l offers 44m IPO shares at 30¢ each
¡¡¡¡FEDERAL International, which provides equipment and services to the region's oil and gas industry, is offering 44 million new shares at 30 cents apiece in its initial public offer.
Launched yesterday, the IPO comprises 4.4 million public tranche shares and 39.6 million placement shares. The placement tranche includes 4.4 million reserved shares at 29 cents each. The offer, which represents 25.1 per cent of Federal's enlarged share capital, will close on Sept 7. Trading on the mainboard is expected to begin on Sept 11.
UOB Asia, the issue's manager and underwriter, said the placement tranche had been fully taken up by institutional investors. Foo Shiang Peow, the bank's senior manager (equity capital markets), said: 'We have not and will not subscribe for placement tranche shares."
Based on net profits of $5.7 million for the year to December 1999, the IPO price represents a historical price-earnings ratio of 6.9 times. Federal reported $80.3 million in sales last year. For the current year, the group expects turnover to dip slightly to $79.9 million as a result of the delay in commencement of new projects in China, Indonesia and Singapore. Federal added that it had not secured many major projects in Indonesia this year.
Given estimated net profits of $6.8 million for the current year, the forecast price-earnings ratio works out to around 9.7 times. Federal's chief financial officer Chng Geok said $5 million of the IPO's net proceeds of $12.2 million would be used to consolidate the group's local operations and to expand its service and testing centre.
Some $1.8 million will go towards financing Federal's business expansion, while $720,000 will be used to increase a subsidiary's paid-up capital. The remaining $4.7 million will be for working capital, she added.
Koh Kian Kiong, Federal's executive chairman and chief executive, said the group was looking to reach new markets by setting up representative offices in Thailand and Houston. Currently, sales in Singapore and Indonesia account for some 70 per cent of Federal's turnover.
Federal's main business is the distribution of flow-line control products to the oil and gas industries. Sales of valves and pipe fittings made up for 81.3 per cent of group turnover last year.
The group also distributes drilling equipment for use on onshore and offshore rigs, and fire protection and detection systems. Last year, Federal diversified into IT services and has already secured $1 million of IT networking contracts in Singapore.
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