Aztech Global sets sights on expansion after IPO

• Aztech Global (SGX: 8AZ) share price closes at S$1.29 per share on first trading day
• Its IPO shares were heavily oversubscribed, and cornerstone investors included JPMorgan
• Proceeds of S$188.6 million will go into expanding manufacturing facilities and growing its business
• Trade Singapore shares with an IG account

Shares opened 7% above offer price

Aztech Global went public on the Singapore Exchange’s (SGX) mainboard on Friday (12 March 2021).

Its shares opened strong at S$1.37, or 7% above its initial public offering (IPO) price of S$1.28. But they lost momentum and finished at S$1.29, only 0.8% higher than the IPO price.

Some 57.6 million shares changed hands. Aztech Global’s market capitalisation stood at S$998.1 million as of Friday night, around 21.2 times its net profit of S$47.2 million in FY2019.

Who is Aztech Global?

Aztech Global is the technology arm of Singapore-based conglomerate Aztech Group, which was established in 1986 and delisted from SGX in 2017.

After the privatisation, the parent company pivoted towards the Internet of Things (IoT) and data communication, and exited non-core segments such as food and beverage, as well as marine and shipping.

Aztech Global makes IoT devices such as smart lights, tracking devices, and climate-control mattresses, as well as data-communication products and LED lighting. It also provides joint development manufacturing and contract manufacturing services to blue-chip customers and technology startups.

Revenue grew 14% from 2017 to S$428.8 million in 2019, while net profit more than quadrupled. However, in the first nine months of 2020, revenue sank 19.6% year-on-year to S$262.2 million and earnings tumbled 14% to S$30.5 million, dragged by the Covid-19 pandemic’s impact.

CIMB analysts noted that Aztech Global faces competition from other providers of electronics manufacturing services (EMS), such as Valuetronics (SGX: BN2) and Venture (SGX: V03) in Singapore, and Taiwan’s Foxconn Technology (TPE: 2354).

Maybank’s Rajiv Vijendran believes the latest listing will boost the diversity of Singapore stocks and shows that investors are receptive towards ‘a proven business that continues to innovate and grow’

What will the IPO proceeds be used for?

The 68.1 million shares offered in the float were heavily oversubscribed.

Placement shares made up most of the offering, at 64.6 million shares, and were 16.4 times subscribed.

Of that, 3.5 million shares were available to retail investors. The public tranche was 18.4 times subscribed.

There were also 163.9 million cornerstone shares sold to 18 cornerstone investors including Eastspring Investments (Singapore), HSBC Global Asset Management (Hong Kong), and JPMorgan Asset Management (Singapore).

In total, the IPO raised net proceeds of about S$283.7 million, of which S$188.6 million will go to Aztech Global. The balance S$95.1 million will go to its parent, Aztech Group.

Aztech Global will use the fresh capital primarily to expand manufacturing facilities; enhance its research and development capabilities; increase sales and marketing channels for overseas expansion; and expand the group’s business through investments, mergers and acquisitions, and joint ventures.

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