Access Engineering braves bearish market; to list via Rs. 500 m IPO in March

Friday, 10 February 2012 00:00 - - {{hitsCtrl.values.hits}}

Access Engineering Ltd. is braving the bearish market conditions as well as some recent weak demand for new offerings with a Rs. 500 million Initial Public Offering (IPO) next month.

The Colombo Stock Exchange (CSE) said yesterday it has approved in principle an application by Access Engineering to list on the Diri Savi Board with an offer for subscription of 20 million shares at Rs. 25 each.

The official opening of the IPO is 6 March whilst investors can subscribe to the offer from 22 February.

Financial advisors and lead managers to the offer is NDB Investment Bank Ltd., and co-managers are John Keells Capital. Registrars to the offer is P.W. Corporate Secretarial Ltd. The last IPO, by Asia Asset Finance Ltd., was undersubscribed by Rs. 129.6 million from its full offering of Rs. 425 million. The offering was for 120 million shares priced at Rs.2.50 each with the option to issue a further 50.16 million shares. At the time of listing only 118.3 million shares had been allotted.

However, despite the setback of under subscription, on its debut Asia Asset Finance saw its share price rise by 72% to Rs. 4.30 and touched a record high of Rs. 8.90. Yesterday the share price hit an intra-day high of Rs. 5.10 before closing at Rs. 4.90, though down by 20 cents from Wednesday.

Asia Asset’s performance at least thus far has defied the dismal track record of some of the comfortably oversubscribed and big ticket offerings such as Softlogic Holdings and Expolanka Holdings, which are trading far below their IPO price.

However, some analysts expect Access Engineering to weather the negativities surrounding IPOs and newly-listed companies.

The IPO follows a successful conclusion of a Rs. 4.5 billion (180 million shares at Rs. 25 each) private placement mid last year followed by Access founder Sumal Perera together with two other co-founders of Access Engineering Ltd., Ranjan Joseph and Christopher Joshua, gifting a combined 15% (120 million shares) of their personal stakes to the 1,100 staff of the Company. At Rs. 25 per share the stake is worth Rs. 3 billion.

From a Group turnover of Rs. 2.4 billion in 2007/8 financial year, Access Engineering has grown to Rs. 3.6 billion in 2010/11. Its gross profit had grown from Rs. 553 million to Rs. 1.3 billion over the four years. Net profit after tax in 2010/11 amounted to Rs. 1.167 billion, which is a three-fold increase in comparison to Rs. 327 million achieved in 2007/8 financial year. Group assets have grown from Rs. 1.9 billion to Rs. 5.76 billion.

Over 80% of the projects handle by Access Engineering are multilateral or bilateral donor funded which gives security to a healthy cash flow situation for the company. With more projects in the pipeline as well as those which are being planned the company sees good prospects. The infusion of Rs. 4.5 billion via the private placement has made the balance sheet stronger to tap the high growth potential as well as embark on new innovative projects.