Saturday February 2, 2013

Karex plans to offer 67.5mil shares in IPO, use proceeds for expansion


PETALING JAYA: Karex Bhd, the world's largest condom maker, is planning to offer 67.5 million shares, or 25% of its enlarged capital, in its initial public offering (IPO) in a bid to expand further.

In its draft prospectus, the company said the IPO would comprise the issuance of 40.5 million new shares and 27 million shares offered for sale by its existing shareholders. The investing public is entitled to a tranche of 13.5 million new shares, representing 5% of the company.

Although it did not reveal how much it plans to raise, it will allocate 54% of the proceeds for capital expenditure to expand its operational facilities, involving the construction of new buildings and the expansion of manufacturing facilities for its subsidiaries, Innolatex (Thailand) Ltd and Innolatex Sdn Bhd.

Five per cent has been earmarked for research and development to expand its product range, 32.7% for working capital and the balance for listing expenses.

RHB Investment Bank Bhd is the principal adviser for the IPO, while ZJ Advisory Sdn Bhd is the financial adviser.

For its financial year ended Dec 31, 2012, the company posted RM12.01mil in net profit on revenue of RM188.75mil. That compares with the 2011 net profit of RM6.98mil and revenue of RM181.75mil.

With an annual production capacity of about three billion pieces, its global market sales cover more than 110 countries.

“According to Infobusiness' independent market research report on the strategic and competitive analysis of the global condom industry, our leading position is further reflected by our export market share of 59.5% (export volume from Malaysia of approximately 6.5 million kg) amongst condom manufacturers in Malaysia for the year 2011,” it said.

Its products are sold via commercial, tender and original brand manufacturers (OBM) markets. In fiscal 2012, commercial, tender and OBM markets constituted approximately 56.9%, 39.3% and 3.8%, respectively, to the group's revenue.

The company believes that its prospects are favourable based on several factors such as growing demand and the non-existence of substitutes for its products.

“With the growing world population, the demand for condoms is expected to grow in tandem,” it said.

While it said there were several substitute products such as oral contraceptives and female condoms, condoms still remained a popular choice due to their economical and easy-to-use nature.

Initially known as Banrub, the company was founded by Goh Huang Chiat and his family when he decided to diversify into manufacturing of latex condoms.

Over the years it ventured into other businesses, including the manufacturing of sterile catheters, lubricating jelly and the setting up of a plant in Thailand.

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