Steel Hawk to use listing proceeds for expansion

KUALA LUMPUR: ACE Market-bound Steel Hawk Bhd will be utilising the bulk of its listing proceeds to expand its business operations.

The oil and gas (O&G) support services firm, which is transferring its listing from the LEAP Market to the ACE Market of Bursa Malaysia, is seeking to raise fresh funds to finance the construction of the Teluk Kalung Facility 2.

The new facility is 500 m from the existing Teluk Kalung Facility 1 and is expected to expand the group’s overall fabrication capacity five-fold from 13 tonnes to 65 tonnes a month.

Deputy chairman and executive director Datuk Sharman K Michael said the Teluk Kalung Facility 2 will allow the group to overcome space constraints, particularly in fabricating structures exceeding six m, which are currently outsourced to subcontractors.

“In our present facility, we are able to carry out fabrication works for structures that are six m and below, and anything longer than that will need to be outsourced to our subcontractors.

“This is due to regulatory requirements, whereby overhead cranes are needed for structures exceeding six m. We need proper handling as well and the Department of Occupational Safety and Health will be involved in the safety aspects.

“Hence, by constructing the new facility, we will be able to have about four overhead cranes to cater up to unlimited length. The industry usually caters between six and 12 m,” he said following the company’s prospectus launch yesterday.

By reducing its reliance on subcontractors in this way, Michael said Steel Hawk will be able to optimise the turnaround time of its engineering, procurement, construction and commissioning (EPCC) services and enjoy more cost savings.

“It will definitely increase our gross profit margin because we will start to do the fabrication work in-house and leverage on a better profit. I will be very happy to see around 20% of cost savings,” he said.

Principally involved in the provision of onshore and offshore support services for the O&G industry, Steel Hawk’s business can be segmented into three core principal activities with the first being EPCC services for chemical injection skids and facilities improvement/maintenance of topside O&G facilities.

The group also carries out the installation and maintenance of oilfield equipment as well as the supply of oilfield equipment.

The existing Teluk Kalung Facility 1 enables the group to carry out the fabrication of chemical injection skids, pipes, tubing and fittings in-house to support its main business segment, namely EPCC services and facilities improvement/maintenance operations. Additionally, Steel Hawk also undertakes the assembly of fire rated doors in the facility.

The group expects to raise RM13.5mil from the initial public offering (IPO) of 90 million new shares at 15 sen a share and plans to use RM7mil (51.6%) of the money for business expansion. A further RM2mil (14.8%) will be used for working capital.

The remainder of the proceeds will be used to repay bank borrowings amounting to RM1mil (7.41%) and to defray the estimated listing expenses of RM3.5mil (25.9%).

Looking ahead, Michael said the company intends to expand its EPCC services to the renewable energy (RE) industry, specifically for solar and hydroelectric energy.

“We are looking to expand primarily into EPCC services. We do not want to operate solar facilities but are rather set on becoming an EPCC contractor. This involves engineering, constructing, commissioning and system integration with Tenaga Nasional Bhd’s lines.

“The same applies to hydroelectric projects, which require the commissioning and installation of equipment like turbines, motors and engines, which are what we are doing now in the O&G industry. We are trying to adopt the knowledge we have in the O&G space in a different segment which is RE,” he said.

Michael said the group’s current team, expertise and softwares are more than sufficient to expand into the RE sector.

“We do not need additional capital expenditure to expand our team, software or resources. We have had one proven experience in 2019 when we did the solar panel installation for Terengganu Gas Terminal under PETRONAS Carigali,” he said.

The 90 million new share sale will see 24.5 million shares being made available to the public, while 12.3 million shares will be offered to its eligible directors, employees and individuals who have made contributions to its success.

A total of 53.3 million shares will be sold to selected investors through a private placement. The existing shareholders of the company will also make an offer for sale of 44.7 million existing shares to selected investors by way of a private placement.

With an enlarged share capital of 490 million shares, Steel Hawk will have a market capitalisation of RM73.5mil upon listing on the ACE Market on Sept 5.

UOB Kay Hian is the principal adviser, sponsor, underwriter and placement agent for the IPO exercise.