KUALA LUMPUR (May 7): Investment analysts have valued Main Market-bound Feytech Holdings Bhd at between 95 sen and RM1.13.
In separate notes, Mercury Securities Sdn Bhd and Apex Securities Bhd recommended investors “subscribe” to the stock at an initial public offering price of 80 sen.
Mercury Securities valued Feytech at a fair value of 95 sen, based on 11 times financial year 2025 (FY2025) forecast earnings per share (EPS).
In a note on Tuesday, the research house said the target price-earnings (PE) of 11 times is at a 30% premium to comparable peers’ average PE, which is warranted given Feytech’s strong growth prospects amid new client wins recently.
Feytech is principally involved in the manufacturing of automotive seats, automotive covers for automotive seats and interior parts such as door ornaments, steering wheels, gear knobs, handbrake handles and consoles.
Mercury said Feytech experienced impressive revenue growth from FY2020 to FY2023, reflecting a three-year compound annual growth rate (CAGR) of 38.6%.
The research house said this growth was driven by the expansion into the manufacturing seat division, particularly through seat production for Kia Malaysia in FY2022 and Mazda in FY2023. Additionally, recent agreements with new clients (Peugeot and Client 2) are expected to drive further growth, with anticipated substantial increases in automotive seat production (more than 100%) over FY2024 to FY2026.
“We believe these new partnerships will be more than enough to mitigate potential near-term headwinds for the industry, in view of impending implementation of fuel subsidy rationalisation by the government that would likely result in slower car sales.
“Having said that, we believe Feytech might not be badly affected, given that the car sales of its current clients (Mazda, Kia and Peugeot) are mostly from premium segment of the market, which tends to be more resilient in our view,” it said.
Mercury said Feytech plans to establish a new manufacturing facility within the Automotive Hi-Tech Valley (AHTV) region.
It said this strategic initiative aims to increase its production capacity and enhance its service to local and other original equipment manufacturers in the Tanjung Malim area, while optimising lead times and delivery schedules compared to operations at the Kulim Plant.
“With the completion of this facility, we believe Feytech is poised for additional revenue growth opportunities beyond FY2026.
“Since FY2020, Feytech has consistently held a net cash position. The group plans to adopt a minimum dividend payout policy of 40%.
“Considering its strong balance sheet and decent cashflow generation, we expect Feytech to distribute 50% of net profits as dividends over FY2024-2026F,” it said.
Meanwhile, Apex Securities valued Feytech at RM1.13.
The research house said Feytech’s core earnings are expected to be boosted by the addition of two new clients in the automotive seats segment, increased utilisation rates leading to improvements in average selling price and higher margins, and aggressive marketing efforts aimed at capturing the AHTV project.
“We like Feytech for its established position in both automotive covers and automotive seats. From 2021 to 2023, the group held the position of the third-largest automotive cover manufacturer in Malaysia, boasting a track record of over 20 years.
“Given the promising outlook for increased demand in both passenger and commercial vehicles produced in Malaysia, we reckon Feytech will be among the key beneficiaries, capitalising on the growing demand and driving sales in both segments of automotive seat covers and automotive seats,” it said.