KUALA LUMPUR (Oct 14): Sorento Capital Bhd, a bathroom and kitchenware firm, could be worth 13.5% more than its initial public offering (IPO) price, driven by strong revenue and profit growth, said TA securities.
The research house projected a fair value of 42 sen for Sorento Capital, compared with its IPO price of 37 sen apiece. At the projected price, the company could be valued up to 11 times the core profit for FY2025.
“We forecast revenue and core profit to be stronger, supported by the group’s dealer expansion plan and the growing demand for bathroom and kitchen sanitary wares,” said TA Securities in a note on Monday.
Sorento markets and sells both in-house and third-party brands of products, ranging from faucets to sinks, and from mirrors to jacuzzis.
Applications for the IPO offering will close on Tuesday (Oct 15), with the listing scheduled for Oct 28.
The listing offers investors up to a 26.62% stake in Sorento Capital, which made a profit after tax of RM24.4 million for its financial year ended Sept 30, 2024 (FY2024). Upon listing, the company is expected to have a market capitalisation of RM318.2 million.
At an IPO price of 37 sen per share, Sorento Capital would have a market capitalisation of RM318 million, and be valued at 13 times its FY2024 earnings per share. That compares to its much larger peer Signature International Bhd’s (KL:SIGN) valuations of 16 times.
TA Securities anticipates an earnings growth of 21.5% to RM29.7 million for FY2025, and 19.7% to RM35.6 million for FY2026, supported by the expansion of the dealer network, as well as a better industry outlook.
Sorento Capital is raising RM84.73 million from the sale of 155 million new shares, and an offer for sale of up to 74 million existing shares.
Under the public issue that would raise RM57.35 million, the company is allocating 43 million new shares to the public, 16 million shares for eligible persons, and 96 million shares to approved Bumiputera investors through private placement.
More than half of the proceeds have been earmarked for the purchase of inventories. The company will also use 10% of the proceeds for branding and promotions, and another 10% for expansion of its dealer network, and enhancement of distribution reach.
To strengthen its revenue base, Sorento intends to expand its project-based sales across various building sectors beyond residential developments, including affordable housing, hotels and office developments, covering both new construction and renovation projects.
Sorento will also utilise 16% for repaying bank borrowings, and the rest to defray listing expenses.
The private placement of shares to select investors and approved Bumiputera investors will gross RM27.38 million, which will accrue entirely to Sorento Capital managing director Loo Chai Lai.
Alliance Islamic Bank is the adviser, sponsor, underwriter and placement agent for the IPO.
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