ValueMax associates launch Well Chip IPO

WELL Chip Group has launched its RM172.5 million (S$49.6 million) initial public offering (IPO).

Based on the indicative timeline released on Wednesday (Jun 26), the closing of applications for the IPO is slated for Jul 10, while the balloting of applications is set to take place on Jul 12.

The IPO shares will be allotted to successful applicants by Jul 19, with Well Chip to list on Bursa Malaysia on Jul 23.

Well Chip is offering to issue 150 million ordinary shares in the company at RM1.15 per share.

Of the total new ordinary shares to be issued, 30 million will be made available for application by the Malaysian public.

Some 45 million shares will be issued by way of a private placement to institutional and selected investors, with 75 million new shares to be placed out to bumiputera investors approved by the Ministry of Investment, Trade and Industry.

Well Chip was set up April 2023 as an investment holding company to own shares in ValueMax Group’s Malaysian associated companies.

It is principally involved in providing pawnbroking services, and in the business of retail and trading of jewellery and gold.

The company has 27 operating outlets comprising 23 pawnshops, along with four retail outlets adjacent to its pawnshops.

Well Chip’s board intends to recommend and distribute dividends of at least 35 per cent of its consolidated profit after tax attributable to shareholders for the first three financial years upon listing.

The company reported RM203.7 million in revenue for its latest financial year ended Dec 31, 2023, up 28.8 per cent from RM158.1 million in the year prior.

Its profit before tax from continuing operations was RM50 million for FY2023, up 35.9 per cent from RM36.8 million in the previous year.

Total cash capital as at end-2023 stood at RM307.3 million compared with RM271.7 million as at end-2022.

As the group’s pawnbroking business requires cash capital to draw on for the disbursement of pawn loans to its customers, Well Chip said that such cash capital requirements will increase as it grows its network of pawnshops or disburses more pawn loans. It therefore views its growth and profitability as largely dependent on its access to – and costs associated with – securing additional funding for its cash capital.

About 72 per cent of the IPO proceeds or RM124.3 million have been allocated for use as cash capital for the group’s 23 existing pawnshops. Some 23.2 per cent, or RM40 million, will be used for expansion. The remaining 4.8 per cent of gross proceeds amounting to RM8.2 million will be used for estimated listing expenses.

Looking ahead, Well Chip said that it intends to expand its network of pawnshops in Johor, while also penetrating new geographical markets within Malaysia.

“After our first venture into Melaka, we intend to first develop and expand our network of pawnshops within Melaka for a wider market reach by setting up new pawnshops,” said the company in its IPO prospectus. “Thereafter, we plan to venture into Negeri Sembilan. We target to achieve our expansion plan to Negeri Sembilan within three years from our listing.”