Singapore: Union Gas Holdings launches $4.1m IPO offer on Catalist

The SGX Centre at Shenton Way, 2017. Credit: DEALSTREETASIA

Fuel products provider Union Gas Holdings has launched its initial public offering (IPO) on the Catalist board of the Singapore Exchange (SGX). Listing and trading of shares are expected to commence on Friday.

Union Gas, a major supplier of bottled LPG cylinders for domestic use in the city-state, serves over 140,000 households with a fleet of delivery vehicles in excess of 100. Additionally, it sells and distributes compressed natural gas (CNG) and diesel to retail and industrial customers.

The IPO is forecast to raise net proceeds of S$5.72 million ($4.1 million), with about S$4 million to fund acquisition activities and S$1 million to build piping infrastructure for the new piped natural gas business. The remainder will go towards working capital purposes.

The new business will supply and sell piped natural gas to the services and manufacturing industries.

In April 2017, it secured a gas retailer licence from the Energy Market Authority of Singapore. The firm delivered a 66.3 per cent increase in net profit from S$2.4 million in 2014 to about S$4 million in 2016. Gross margins rose from 18.4 per cent to 32.5 per cent over the same period.

Post-listing, investment proceeds will see it deepen its gas retail footprint and diversify its business competencies. Based in Singapore, the company is known for its “Union” brand of bottled liquefied petroleum gas (LPG) cylinders

The public offer comprises 30 million new shares and 30 million vendor shares for a total of 60 million shares. Half of this are new shares at 25 Singapore cents each. With an enlarged share capital of 200 million shares post-listing, the group will have an initial market capitalisation estimated at S$50 million.

According to Union Gas Holdings, 58.72 million shares will be placed with institutional investors. 1.28 million shares will be made available to the public. These shares represent 30 per cent of its enlarged share capital and are priced at 6.95 times of its pro forma earnings per share of 3.6 cents for the year ended 31 December 2016.

In an official statement, chief executive, Alexis Teo said, “We have observed a gradual attrition of smaller players in the retail LPG industry mainly due to increased operating costs, stricter regulations and higher customers’ expectations, and we think this will open the door for us to lead a consolidation of the retail LPG industry.”

However, the sector is undergoing structural shifts, with a review of the IPO prospectus, with LPG revenue decreasing by 14 per cent over three years due to structural changes that come with customers shifting to piped town gas from bottle LPG, while its CNG business – which services CNG-powered taxis in Singapore – has seen a 52 per cent decline as these taxis are phased out and replaced by diesel and electric models.

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