KUALA LUMPUR (Nov 28): TA Securities has valued Main Market-bound TMK Chemical Bhd (KL:TMK) at RM1.99, given its main competitive advantages, including a strong market share in the inorganic chemicals market.
TA Securities' fair value of RM1.99 per share for TMK Chemical translates into a price-to-earnings (PE) ratio of 16 times based on the company’s forecasted financial year 2025 (FY2025) core earnings per share (EPS), which is in line with the industry's average price multiples.
In comparison, TMK Chemical's initial public offering price of RM1.75 per share translates into a trailing PE of 19.9 times FY2023 core EPS.
TMK Chemical is scheduled for listing on Dec 12.
According to TA Securities' note on Thursday, the research firm’s valuation is underpinned by TMK Chemical's strong market share in the inorganic chemicals industry across Southeast Asia, with notable shares in Malaysia (24.91%), Vietnam (9.08%), and Singapore (23.98%).
TMK Chemical operates in a niche market characterised by high barriers to entry, primarily due to stringent licensing requirements.
The company’s proven track record in the industry further bolsters its standing. Despite the relatively limited number of direct publicly listed competitors, Batu Kawan Bhd (KL:BKAWAN) is considered a close local peer, as it is involved in inorganic chemicals through its subsidiaries.
For a more comprehensive market comparison, TA Securities also references international competitors such as Brenntag SE in Vietnam and Chemical Industries (Far East) Ltd in Singapore.
The research house has also projected TMK Chemical to achieve solid earnings growth over the next three years, with an estimated 22.0% growth in FY2024, 15.5% in FY2025, and 15.9% in FY2026.
The company's earnings are expected to reach RM107.5 million in FY2024, RM124.1 million in FY2025, and RM143.8 million in FY2026, it said.
These growth projections are based on a revenue compound annual growth rate (CAGR) of 7.0%, with core profit margins anticipated to be 7.7% for FY2024, 8.3% for FY2025, and 9.0% for FY2026.
TA Securities remains optimistic about the growth prospects of the inorganic chemicals industry in Malaysia, driven by the manufacturing sector's expansion and government support, including tax incentives.
Besides that, TMK Chemical is also preparing for further capacity expansion. The company plans to double its current production capacity of 216,000 tonnes of sodium hydroxide to 432,000 tonnes at its new Banting Plant 2.
The procurement process for the plant is already underway, with operations slated to commence in the fourth quarter of 2026.
TMK Chemical's extensive product portfolio includes a broad range of inorganic chemicals such as acids, alkalis, and salts, which are vital to a wide array of industries. The company operates 15 facilities, two terminals, and a manufacturing plant across Malaysia, Singapore, and Vietnam, establishing itself as a significant player in the Southeast Asian market.
Looking ahead, TA Securities forecasts continued growth in both revenue and core profits for TMK Chemical, driven by increased demand for inorganic chemicals.
This growth is further supported by the establishment of the Pengerang Integrated Petroleum Complex, which is set to become a key chemical and petrochemical hub, alongside favourable tax incentives aimed at attracting substantial investments.