KUALA LUMPUR (April 23): Pecca Group Bhd will see a delay in the utilisation of its initial public offering (IPO) proceeds of about RM2.6 million, while RM6.6 million will see some variation in its utilisation, according to the group's filing with Bursa Malaysia today.

The board of directors have approved of the variation and extension of time for the utilisation of the proceeds raised. The extension will be for another 24 months from April 19 this year, the group said.

Among some of the variation and delay of the utilisation of the proceeds were in the estimated listing expenses, purchase of new machineries for the production of car leather seat covers, as well as the establishment of a market presence in Thailand.

The planned purchase of new machineries was to support Pecca’s business activities and to expand its annual production capacity from 120,000 sets to 170,000 sets of car seat covers, to cater for the anticipated increase in sales volume.

However, a weaker automotive industry’s performance with a significantly lower total new passenger & commercial vehicles registered in Malaysia for both years 2016 and 2017, at 580,124 and 576,635 respectively — compared with 666,674 units recorded in year 2015, as published by Malaysian Automotive Association (“MAA”) — had led the board to be more prudent as in not committing to all budgeted machines and deferring some purchases.

However, the group is expected to purchase the remaining one cutting machine and one perforation machine within the next 24 months, in view of incremental orders secured for some leather seat cover programs.

While some ad-hoc orders from a customer have been successfully completed, the group is still exploring various business opportunities with car manufacturers in Thailand, the filing noted.

“Despite these efforts, the group has yet to secure a sizeable order from Thailand customers and hence, is not able to complete the utilisation of IPO proceeds for the purpose of manufacturing of the inventory of leather seat cover,” Pecca added.

The group's board is also confident of securing some supply contracts for leather seat covers and utilising the balance of the IPO proceeds within the next 24 months, with the present ongoing discussions with one entity in Thailand on distribution channels, coupled with the additional efforts in its sales and marketing activities.

As of market close today, Pecca’s share price was unchanged at RM1.15, with about 76,900 shares traded, giving it a market capitalisation of RM211.9 million.