KUALA LUMPUR (Dec 20): Infrastructure utilities engineering services provider Jati Tinggi Group Bhd opened at 30.5 sen on Bursa Malaysia's ACE market on Wednesday, a 12.96% or 3.5 sen premium to its initial public offering price of 27 sen.
The stock climbed as much as seven sen or 25.93% to 34 sen, before paring some gains to close at 31 sen, still up four sen or 14.8% from its IPO price — with a market capitalisation of RM121.46 million.
It saw 141.81 million shares traded, making it the third most actively traded stock on Bursa Malaysia. Prior to listing, the group noted that its initial public offering (IPO) had been oversubscribed by the Malaysian public by 16.11 times.
Jati Tinggi is involved in the provision of underground and overhead utility engineering services and solutions, engineering, procurement, construction and commissioning of electricity substations (EPCC), as well as the trading of substation equipment and street lighting.
The group’s major customers are mainly the main contractors appointed by Tenaga Nasional Bhd, who are involved in electricity supply projects.
Jati Tinggi recorded a profit after tax of RM9.13 million for the financial year ended Nov 30, 2022 (FY2022), up 26.15% from RM7.24 million in the previous year, as revenue jumped 143% to RM234.61 million from RM96.41 million in FY2021. For the third quarter ended Aug 31, 2023 (3QFY2023), the group registered a net profit of RM1.41 million, on revenue of RM33.05 million.
The group raised RM18.04 million from its IPO, of which RM7.34 million has been allocated for general working capital, followed by RM7 million for repayment of bank borrowings, RM3.5 million for estimated listing expenses and RM200,000 for capital expenditure.
Rakuten Trade has a “buy” rating on Jati Tinggi with a target price of 38 sen, based on 14 times its forecast earnings per share (EPS) of 2.7 sen for FY2024.
Based on its existing sizable orderbook, potential to be a key solutions provider in the National Energy Transition Roadmap (NETR), and gradual evolution into a main contractor that allows it to tender for larger projects and improve on its profitability, Rakuten expects Jati Tinggi to register core net earnings of RM5.6 million and RM10.8 million for FY2023 and FY2024, respectively.
Meanwhile, Public Investment Bank Bhd derived a fair value of 35 sen for the stock, which also pegged it at 14 times its forecast EPS of 2.5 sen for the group for FY2024. This represents a 20% discount to its peer MN Holdings Bhd, which has a PE multiple of 17.6 times.
The research house said Jati Tinggi’s earnings growth trajectory will hinge on securing more large-scale projects, which helps to position the group favourably in the course of tendering for new projects as the main contractor.
TA Securities Holdings Bhd is the principal adviser, sponsor, underwriter, and placement agent for the IPO exercise. .