Orgabio to raise RM30m from IPO for business expansion

PETALING JAYA: Instant beverage premix manufacturer Orgabio Holdings Bhd, en route to list on Bursa Malaysia’s ACE Market on July 5, plans to raise RM29.97 million from its initial public offering (IPO) for business expansion.

The company plans to use RM16 million (53.39%) raised from the IPO to part finance the construction of its new factory in Semenyih, as it expands its manufacturing capacity to cater for its future business growth.

It will further utilise RM8.14 million (27.15%) of the proceeds for working capital requirements mainly to purchase supplies such as milk powder, creamer, colostrum powder, coffee powder, sugar and sachet foils used for the manufacturing of its products; RM2.23 million (7.44%) to purchase new machinery to support and enhance the efficiency of its existing manufacturing activities while the remaining RM3.6 million (12.02%) for estimated listing expenses.

Its executive deputy chairman Datuk Ean Yong Tin Sin said the increase capacity will enable the company to take on new customers and more large orders arising from its plans to grow the customer base in the direct selling segment, increasing export sales and expanding the range of product offerings and market presence of its house brands.

“We plan to grow our customer base in the direct selling segment by securing more local and overseas direct selling companies as our customers as direct selling companies are able to provide us with high manufacturing volumes, which will in turn enhance the growth of our financial performance and the sustainability of our group.

“By engaging our instant beverage premix manufacturing services, these direct selling companies can leverage on our experience and insights on various blends, taste profiles and preferences which are specific to their target markets to launch new products under their brands,” Ean Yong said.

In the past four financial years ended June 30, 2018, 2019, 2020 and 2021, its sales to direct selling companies contributed between 61.4% and 80.6% to the group’s revenue. As at May 17, 2022, it has nine local direct selling companies as its customers.

Commenting on the fluctuation in raw material prices, Ean Yong said Orgabio has begun to pass on the increase in cost of supplies to its customers by increasing the selling price progressively to improve the company’s gross profit margins and have factored in the increase of raw material prices when issuing quotations to new customers.

“We provide our customers with three months advanced notice on the changes in prices and upon agreement, new purchase orders with the adjusted pricing will be issued for future orders,” he added.

At an issue price of 31 sen per share, the IPO entails an issuance of 96.67 million new shares. Upon listing, this is expected to represent 39% of its enlarged share capital of 247.87 million shares and a market capitalisation of RM76.84 million.

Of the 96.67 million new shares, 12.39 million new shares (5%) will be made available to the Malaysian public via balloting; 6.2 million new shares (2.5%) for its eligible directors and employees as well as persons who have contributed to the success of Orgabio group while the remaining 78.08 million new shares (31.5%) are earmarked for private placement to selected bumiputra investors approved by the Ministry of International Trade and Industry (Miti) and selected investors including its cornerstone investor.

The IPO has attracted and secured traditional healthcare group Hai-O Enterprise Bhd, a wholly owned subsidiary of Main Market-listed Beshom Holdings Bhd, as its cornerstone investor.

The IPO is open for subscription from today and will close on June 21.

M&A Securities Sdn Bhd is the adviser, sponsor, underwriter and placement agent for the IPO exercise.