Malaysian scrap dealer looks to go public

Heng Hup Holdings Ltd., a Malaysia-based ferrous scrap trading company, is in the process of raising up to $20 million via an initial public offering (IPO) on the Hong Kong stock exchange. The company offered shares in its IPO in late February and early March.

According to Heng Hup, it ranked first in terms of trading volume with domestic steel mills in Malaysia in 2017, having a market share of approximately 20.8 percent.

The decision to issue an IPO follows China’s efforts to restructure and eliminate excess steel manufacturing capacity in 2016 and the implementation of protective measures for the domestic steel industry by the Malaysian government in April 2017, according to the firm.

Since those moves, Malaysia’s domestic steel industry has continued to make a strong recovery since 2017, which in turn leads to a greater demand for ferrous scrap from domestic steel mills, says Heng Hup.

Heng Hup Holding also says it entered into a joint venture agreement with Hong Kong-based Chiho Environmental Group Ltd. this January to develop a processing facility to provide scrap motor dismantling services to Chiho in Malaysia, with an expected annual dismantling capacity of 70,000 metric tons.

Heng Hup says it also intends to use proceeds from the offering to replace its fleet of trucks; enhance the company’s processing abilities; set up its enterprise resource planning system; set up a new scrap yard in Malaysia; expand an existing scrap yard in Selangor, Malaysia; and use close to half of the amount raised for working capital to be used for its scrap ferrous metal trading business.

The company says it is an approved scrap metal provider to the Lion Companies, which it describes as the largest steel producer in Malaysia in 2017, “with stable and significant demand for scrap ferrous metals.”

A heavily redacted version of a 390-page IPO prospectus issued by Heng Hup and the Hong Kong Exchange (HKEX) in 2018 can be found on this web page.