As of 25 June 2019, Tashin Holdings Bhd (Tashin) has opened a formal invitation to subscribe its IPO shares at RM 0.58 a share. Here are its IPO documents:

Tashin IPO

Part 1
Tashin IPO

Part 2

The application for Tashin IPO shares will be closed on 19 July 2019 with these shares scheduled to be listed on Bursa Malaysia tentatively on 1 August 2019. 

Here, I’ll summarize my findings of its IPO documents as follows: 

#1: Business Model 

Tashin is involved in the steel industry. It has three key business segments.

  1. First, it processes steel coils into slit coils and steel sheets.
  2. Second, Tashin produces a wide range of steel pipes, flat bars, square bars, expanded metals, C Purlins and checkered plates.
  3. Third, it trades steel plates, steel bars, round bars, wire mesh, and angle bars. They are all operating from its facility in Prai, Penang. 

Over the last four years, Tashin, as a collective group, has produced 100,000 MT in steel products per annum, averaging around 70% in utilisation rate.

Year

2015

2016

2017

2018

Actual Production (MT)

100,294

103,578

100,081

109,568

Annual Capacity (MT)

135,960

144,720

149,520

149,520

Utilisation Rate (%)

73.77%

71.57%

66.94%

73.28%

Source: Page 93 of Tashin IPO Document

#2: Financial Results 

Tashin’s financial results are as follows:

Revenues: 

Tashin has achieved higher revenues in 2017 and 2018 despite flat growth in its actual steel production. It is attributable by higher average selling prices for the company’s steel products. 

Shareholders’ Earnings: 

Tashin has increased its earnings in 2016 despite flat sales growth. It is because it has achieved improved margins due to a price fall for its raw materials. It had maintained its margins in 2017. As for 2018, Tashin has recorded a fall in profits due to incurring higher raw material expenses.   

Return on Equity: 

Tashin has a 4-Year Return on Equity (ROE) of 8.14% a year. This means that the company has made, on average, RM 8.14 in annual earnings from each RM 100 it has in shareholders’ equity from 2015 to 2018. 

Year

2015

2016

2017

2018

Revenues (RM ‘000)

212,284

214,741

257,701

260,545

Shareholders’ Earnings (RM ‘000)

4,160

12,184

15,715

11,281

EPS (Sen)

1.19

3.49

4.50

3.23

Return on Equity (%)

3.94%

10.53%

10.85%

7.24%

Source: Page 167 of Tashin IPO Document

#3: Balance Sheet Strength 

For the last 4 years, Tashin has maintained well above 1.0 in current ratio and a gearing ratio below 10%. Evidently, Tashin is a low-geared company. 

Year

2015

2016

2017

2018

Cash & Cash Equivalent (RM ‘000)

8,546

8,417

24,556

14,823

Current Ratio

1.75

2.06

1.75

3.51

Gearing Ratio (%)

6.20%

3.67%

6.93%

6.57%

Calculated from Data Sourced from Page 168 & 169 of Tashin IPO Document

#4: IPO Proceeds 

Tashin intends to raise RM 34.41 million in gross proceeds from issuance of IPO shares. It intends to utilise them by: 

Source: Page 13 of Tashin IPO Documents 


1. Land Acquisition & Construction of a New Factory (RM 17.55 million)

Tashin plans to acquire an industrial land with total floor space of 90,000 sq. ft. and construct a new factory on it to manufacture wire mesh. It intends to wrap out this development within 24 months upon its IPO listing. 

2. Purchase of Machinery and Equipment (RM 7.70 million) 

Source: Page 30 of Tashin IPO Documents 

Tashin budgets RM 4.10 million to buy machinery to produce wire mesh. These will contribute another 24,000 MT a year in wire mesh production capacity and thus, lower its reliance on third party suppliers for its accessibility of wire mesh, leading to improved profitability. 

In addition, Tashin has allocated RM 1.80 million each to buy a new slitting line and five packing machines. The new slitting line will boost its annual processing capacity by 26,400 MT to 93,600 MT. The five packing machines are intended to reduce its reliance on manual labour and to boost packing speed for steel pipes and steel coils. 

3. General Working Capital (RM 5.96 million)

4. Estimated Listing Expenses (RM 3.20 million) 

#5: Management 

Prestar Resources Bhd and Formula Naga Sdn Bhd remain as main shareholders of Tashin Holdings Bhd with 34.0% and 33.1% shareholdings respectively. 

Dato’ Toh Yew Peng is a main shareholder via his stake in Prestar Resources Bhd and he is appointed non-executive director of Tashin. Lim Choon Teik who is the Managing Director of Tashin is also a substantial shareholder through his stakes held in Formula Naga Sdn Bhd. 

#6: Major Risks 

Tashin is subjected to the following risks:

1. Volatile Margins

Profit margins are dependent on global steel prices, which would affect both its average sales price and raw material costs.

Tashin’s gross profit margins are as follows: 

Year

2015

2016

2017 2018

Gross Profit Margins

7.47%

13.73%

14.02%

9.66%

Source: Page 133 of Tashin IPO Documents 

The firm may face the risk of low margins if it fails to pass on the cost increments of raw materials to its customers. 

2. Forex Exchange Risks 

In 2018, 55.8% of Tashin’s raw materials purchases are denominated in the U.S. Dollar. It derived 99.0% of its sales in Ringgit Malaysia.

Hence, a fall in the value of Ringgit against the U.S. Dollar will negatively impact its financial results if it fails to pass on the rise in raw material costs to its customers. 

Year

2015

2016

2017

2018

Purchases in U.S. Dollar / Total Purchases (%)

33.22%

31.18%

33.18%

55.79%

Source: Page 137 of Tashin IPO Documents 

3. Reliance on CSC Steel as a Supplier 

Tashin buys a certain grade of cold rolled coils (CRC) from CSC Steel Sdn Bhd. It does not import them for any imports are subjected to import duties of 15.0%. It has established a long-term relationship (20 years) with CSC Steel.

But, if it fails to receive supply of these CRC from CSC Steel, then, Tashin has no choice but to import CRC from overseas, thus, subjecting itself to the above duties. 

Year

2015

2016

2017

2018

Purchases from CSC Steel Sdn Bhd

/ Total Purchases (%)

31.53%

49.13%

48.09%

31.40%

Source: Page 138 of Tashin’s IPO Documents

#7: Valuation

At current price of RM 0.58, the IPO offer is valued at P/E Ratio of 17.96, which is based on EPS of 3.23 sen in 2018.

Based on net assets of RM 0.55 a share, its P/B Ratio is 1.05. Based to its IPO document, it does not adopt a fixed dividend policy at the moment. 

Conclusion: 

Despite volatility in steel prices, Tashin has remained profitable for the last four years. Inherently, it would continue to face the above risks which would impact its financial results.

But, fortunately, Tashin is in the industry for 18 years and it is serving 459 customers where 55.4% of them have been with Tashin for more than 10 years. It adds to the income stability to Tashin. 


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