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Singapore Investment



Coraza Integrated Technology Berhad (CORAZA, 0240), which was listed in January last year, has recently announced a private placement for the sake of purchasing new equipment.

Before discussing this corporate activity further, let me briefly introduce the company CORAZA.

CORAZA, headquartered in Penang, Malaysia, is a technology company that provides comprehensive engineering services, from the design, development, and manufacturing of sheet metal and precision machined parts to sub-modular assembly.

The company has a wide range of clients, including the semiconductor industry, life sciences, instrumentation and medical devices, telecommunications, electronics, and aerospace industries.

According to the 2022 annual report released a few days ago, CORAZA's main revenue comes from the sale of sheet metal products and precision mechanical products, with sheet metal product sales accounting for about 83.31% of the company's total revenue. The company's main market is Malaysia, which contributed about RM94.00 million or 65.57% of its revenue in the 2022 fiscal year, followed by Singapore (24.80%), the United States (8.69%), Europe (0.50%), and other Asian countries (0.44%).

As of the end of 2022, CORAZA's operating revenue was about RM143.35 million, and its net profit was about RM14.71 million. Compared to 2021, the company's operating revenue and net profit increased by 35.07% and 14.47%, respectively. CORAZA's total assets also increased by about 43.95% to around RM140.50 million. This is mainly due to the increase in inventory and cash and cash equivalents. Specifically, the company's inventory increased by about RM6.00 million, from around RM25.00 million to around RM30.90 million. This was mainly to meet the growing demand from customers and to mitigate risks related to global supply chain disruptions in the face of continued uncertainty.

Now, let's take a look at the corporate activity announced by the company on March 29. According to the announcement, CORAZA will issue a private placement of 20.00%, or about 85.84 million shares, to third-party investors. At the same time, the company will also issue a long-term incentive plan (LTIP) and an employee share option scheme (ESOS) not exceeding 10.00% of the total issued share capital to reward qualified directors and employees.

It is reported that the company will issue the shares at a price of 81.00 cents per share, which is expected to raise about RM70.00 million, of which about RM44.60 million or 63.71% will be used to purchase new machines. The rest of the funds will be used to repay bank loans (about RM9.90 million or 14.14%) and for working capital (about RM14.00 million or 20.00%).

Although this private placement will dilute the company's earnings per share (EPS) in the short term, the funds raised will undoubtedly have a positive impact on its growth in 2024.

In terms of valuation, assuming the company can maintain a net profit of RM14.71 million in the 2023 fiscal year, and based on the current market capitalization of RM407.50 million, CORAZA's future price-to-earnings ratio is about 27.72 times. Compared to Kobay Technology Berhad (KOBAY, 6971) with a future P/E ratio of about 22.16 times, Coraza's current price can be considered average.

Looking ahead, CORAZA plans to independently produce some complete machine components for the aviation industry and begin implementation after delivering new components over the next few quarters. CORAZA also intends to expand its investments in the semiconductor and medical or life science fields.

In addition, I also noticed the list of the top 30 shareholders in the company's 2022 annual report. Apart from the management team, all others are well-known fund investment institutions, such as JP. MORGAN, UBS, AIA, ARECA, CITI, HONGLEONG, KAF, and MTDC under the Treasury Holdings.

So, are readers looking forward to CORAZA's future development?



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