KUALA LUMPUR (Jan 29): TA Securities has initiated coverage of PGF Capital Bhd at RM1.60 with a "buy" recommendation and a target price (TP) of RM2.76, representing a strong upside of 72.7%.

PGF is principally involved in manufacturing and selling of glass mineral wool used in building insulation.

In a note on Monday, the research house said PGF plays a crucial role in global warming with its low-cost, non-combustible and effective building insulation solution, namely glass wool.

TA Securities said PGF is also is one of the largest landowners in Tanjong Malim, possessing 1,311 acres of leasehold land adjacent to Proton City.

It said based on the market price of RM45 psf, the value of the land is three times greater than PGF’s market capitalisation.

“We believe this would make PGF a potential privatisation or merger and acquisition target in the future.

The research house said that looking forward, it projects FY2024 (financial year ending Feb 29, 2024)/25/26 revenue growth of 49%/42%/29% respectively.

“The increase in revenue would contribute to core profit of RM10.3 million/RM41.9 million/RM42.6 million,” it said.

“We value PGF’s manufacturing business at 10 times calendar year 2025 earnings, or two multiples higher than our target price-earnings of eight times for the building material sector.

“The premium is in line with growing investing trends in carbon-neutral companies,” it said.