KUALA LUMPUR (Oct 21): 3REN Bhd (KL:3REN), an automation solutions and engineering services provider, is poised for a potential 14.3% rise above its initial public offering (IPO) price of 28 sen per share, according to TA Securities.
The research firm projected a fair value of 32 sen for 3REN, reflecting a price-to-earnings ratio of 16 times for FY2025, driven by the growth in Internet of Things (IoT), artificial intelligence (AI), machine learning and big data analytics.
“The product engineering services industry in Malaysia is projected to grow at a compound annual growth rate (CAGR) of 19.7% between 2024 and 2026, reaching RM1.2 billion by 2026, while the integrated circuit (IC) assembly and test services industry in Malaysia is expected to grow by 10.2% during the same period, reaching RM23.3 billion in 2026,” said TA Securities in a note on Monday.
The research house also sees the automated manufacturing and digitalised solutions industry in Malaysia growing at a CAGR of 12.7% between 2024 and 2026, reaching RM17.4 billion by 2026.
3REN serves major clients in the semiconductor and electronics sectors, with Intel’s group of companies contributing 57% of its revenue in FY2023.
At the IPO price of 28 sen, 3REN is expected to have a market capitalisation of RM182 million upon listing. The group recorded RM94.9 million in revenue for FY2023, a decline of 8.4% from the previous year, attributed to lower orders from Intel.
Nevertheless, TA Securities projects the company to achieve earnings growth of 1.3% to RM12 million for FY2024, 7.6% to RM12.9 million for FY2025, and 8.7% to RM14.1 million FY2026.
“Moving forward, we forecast revenue and core profit to be stronger, underpinned by the business expansion plan and better industry outlook,” the research house added.
The IPO involves the issuance of 110 million new shares and an offer for sale of 45 million shares. Applications will close on Oct 23, with the listing scheduled for Nov 6 on the ACE Market of Bursa Malaysia.
The company plans to allocate RM30.8 million from its IPO proceeds, with 23.4% earmarked for new delivery centres, 24.7% for bank loan repayments, and 16.5% for research and development, alongside other strategic uses.
3REN's core business includes the provision of automation solutions and engineering services, covering the design, development, and sale of digitalised solutions and automated equipment. It also offers product engineering and support services for IC development, assembly and testing.
The group’s products and services cater to various segments within the semiconductor, electronics and manufacturing value chains. 3REN has a global footprint with a presence in countries including Thailand, Singapore, the US, China, Vietnam, the Philippines, Canada, Costa Rica, India, Mexico and Taiwan.
KAF Investment Bank Bhd is acting as the adviser, sponsor, underwriter and placement agent for the IPO.