KUALA LUMPUR (April 17): Kenanga Investment Bank Research has initiated coverage of Techbond Group Bhd at 39 sen, with an “outperform” rating and a target price (TP) of 45 sen, based on 13.5 time forecast calendar year 2024 earnings per share of 3.4 sen, in line with international peers in the adhesive sector.
In a note on Monday (April 17), the research house said it likes Techbond for its: i) customer-centric, solution-provider and manufacturer model; ii) strong customer base across both consumer and woodworking sectors; and iii) diverse and growing presence in Southeast Asia, strengthened by the integration of its upstream and midstream operations, and recent expansion with the acquisition of Malaysian Adhesives and Chemicals (MAC) from PPB Group Bhd (outperform; TP: RM19.30).
“While the group is much smaller than benchmarked listed peers, we believe the price-earnings ratio is justified given the specialised nature of its business and exposure to niche markets with less competition.
“Coupled with strong expected earnings growth following the normalisation of its profits across the core group as well as MAC, we believe the earnings prospects provide a basis for the higher multiple despite its smaller size.
“There is no adjustment to our TP based on ESG (environmental, social and governance aspects) given a three-star rating as appraised by us,” it said.