LS 2 Holdings Limited IPO

LS 2 Holdings Limited (“LS 2”) has officially launched its Initial Public Offering (“IPO”) on the Catalist of Singapore Exchange on 15 February 2022.

In this article, we will be looking at some of the key highlights for this upcoming Catalist IPO.

Details of Offering

LS 2 will be offering 27.75 million ordinary shares at S$0.20, in which all will be issued by way of placement.

Based on the offer price and enlarged post-IPO share capital of 185 million shares, LS 2's market capitalization will come in at around S$37 million.

LS 2 expects to commence trading on the Catalist of Singapore Exchange at 9.00 a.m. on 24th February 2022.

Corporate Profile for LS 2

LS 2 is a Singapore-based integrated environmental services provider, specialising in cleaning services, with a track record of more than 20 years. Its principal business involves in cleaning services, including conservancy services, facilities cleaning services, housekeeping services, school cleaning services, road and beach cleaning services, pandemic disinfection services, façade cleaning services and F&B cleaning services.

In addition to the cleaning services that we specialise in, LS 2 also has an established network of subcontractors to deliver integrated environmental services such as waste management services to customers. LS 2’s customers comprise entities from both the private and public sectors in Singapore and include town councils, facilities managers for commercial and private residential properties, public and private education institutions and private companies.

Group Structure

Management Team

Mr. Roger Tan is the Executive Chairman and Executive Director of LS 2 and was appointed to the Board on 18 June 2020. He is responsible for the overall strategic direction and expansion plans for the growth and development of LS 2. Mr. Roger Tan joined the Group in May 2000 upon his acquisition of LS 2 Services and has more than 20 years of experience in the environmental services industry.

Mr. Alvin Ong is the Chief Executive Officer and Executive Director of LS 2 and was appointed to the Board on 28 September 2021. He is responsible for directing and controlling the operations of the Group. Mr. Alvin Ong has more than 18 years of experience in the environmental services industry.

Historical Financial Performance

For 1H FY2021, LS 2’s revenue saw a decline of 9.8% year-on-year to S$25.5 million. The topline decline was mainly attributable to the completion of two existing contracts from the private sector secured in previous financial years, which lapsed in FY2020.

Despite the single digit percentage decline in revenue, LS 2’s profit after tax crashed by nearly 55% year-on-year to just S$1.8 million. The sharp fall can be attributed to the higher foreign worker levy paid because of the absence of one-time foreign worker levy rebates and waivers.

Dividend Policy

LS 2 currently does not have a fixed dividend policy. The declaration and payment of future dividends may be recommended by the Board at their discretion, after considering several factors, which includes:

• The level of cash and retained earnings.
• Actual and projected financial performance.
• Projected levels of capital expenditure and other investment plans.
• Working capital requirements and general financing condition.

Use of IPO Proceeds

LS 2 intends to use the net proceeds from the Offering primarily for the following purposes:

• Business expansions (expansion of service offering, strategic acquisitions and joint ventures)
• Working capital

Business Strategics & Future Plans

In conjunction with this IPO, LS 2 has laid out some of its upcoming business strategies and future plans.

Firstly, it will continue to strengthen its market position in Singapore by collaborating with property developers and asset managers, expanding and upskilling workers, tendering for higher margin projects and diversifying its customer base.

Secondly, it will expand the scope of their service offerings to directly provide a full range of environmental services, including horticultural services, road cleaning services and deepen its waste management services.

Lastly, LS 2 will continue to stay ahead of the curve by investing in equipment and technology to improve the management, automation, efficiency and productivity of cleaning processes.

Risk factors for LS 2

While we see potential in the upcoming growth of LS 2, we also noted some risks that they might face, which include:

• Operate in a highly competitive sector
• May be affected by any increase in labour costs
• Labour-dependent and supply of workers may be affected by various factors
• Majority of the revenue is being derived from a limited number of key customers

Conclusion

In summary, below are some investment merits that LS 2 has to offer:

• Qualified and competent management team
• Ongoing investments in efficiency and productivity-enhancing equipment and technology
• Established brand name with a 20-years track record and long-standing customer relationships
• Large workforce of well-trained and operationally ready workers numbering over 2,000

With the amount raised from this IPO, LS 2 will have enough resources on hand to deploy its intended expansion plan and secure its future growth trajectory.

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