KUALA LUMPUR (July 31): Apex Securities Bhd has derived a target price of 32 sen for ACE Market-bound geotechnical instrumentation and testing specialist Glostrext Bhd, saying valuation is based on the 14x PER (price-to-earnings ratio) of Glostrext’s FY2025F EPS of 2.3 sen, which is in line with the average forward 12-month PER of the Bursa Malaysia Construction Index.
In a note on Monday (July 31), the research house said with a 31 year experience in the industry, Glostrext has established a track record with few sizable and notable projects, such as the KLCC, the PNB 118, the Jewel Changi Airport, the Rapid Transit System, and the Naga 3 Integrated Entertainment Complex.
Glostrext has maintained good business relationships with its reputable customers such as TPW Engineering and Pintary Foundations, which has provided the group with a strong foundation to the growth and expansion of its business in the future.
Glostrext is involved in piling, structural and geotechnical-related services, covering instrumentation, testing and monitoring services to construction projects, as well as completed buildings and infrastructures comprising landed buildings such as high-rise buildings, industrial buildings and tunnels.
Apex Securities said Glostrext is well-positioned to benefit from the mandatory requirements or compliance on pile testing, as well as structural and ground monitoring by the governments of Singapore and Malaysia.
It said that there are rising awareness and safety regulations following some major accidents like the Nicoll Highway collapse in both countries that the group operated in. In Singapore, pile load testing is mandatory for piling activities for all construction buildings and infrastructure, and all pile load tests are required to be submitted to the Commissioner of Building Control and the geotechnical testing services are mandatory for construction projects under supervision of Jabatan Kerja Raya (JKR).
“With rising awareness, the demand for the services of the group is expected to grow and Glostrext is well-positioned to capture business opportunities,” it said.
Apex Securities said Glostrext recorded an uneven financial performance from FY2020 to FY2023.
“The performance is mainly due to the mandatory suspension of construction activities imposed by the governments of Singapore and Malaysia to contain the spread of Covid-19.
“However, we expect the group to return to its growth trajectory in FY2024 and FY2025, supported by the recovery in the construction sector and economic activities, coupled with the emergence of opportunities from some mega infrastructure projects.
“Our FY2024F net profit forecast stands at RM7 million, which is projected to grow at 70% y-o-y (year-on-year) in FY2024F and 31% y-o-y in FY2025F to RM 9.2 million.
“Moving forward, we expect [that] the margin of the group will be expanded, mainly due to utilisation of technology (the WiNA platform) that will drive up efficiency to improve its margins,” Apex Securities said.
M&A Securities is the adviser, sponsor, underwriter and placement agent for the IPO exercise.
Glostrext is tentatively slated to be listed on Bursa Malaysia on Aug 15, 2023.