KUALA LUMPUR (March 12): Mercury Securities has ascribed a fair value of 36 sen per share to ACE Market-bound Chemlite Innovation Bhd (KL:CLITE), a 44% premium to its initial public offering (IPO) priced at 25 sen a share. 

Chemlite is an engineering support services company specialising in surface finishing. It primarily serves the semiconductor, electrical and electronics (E&E), and machinery and equipment sectors.

The company is set to list on the ACE Market on March 26.

Mercury Securities in a note values Chemlite Innovation based on 14.5 times earnings per share forecasted for the financial year ending Dec 31, 2026 (FY2026).

Since the Penang-based company has no direct listed competitors in, its valuation is compared to local semiconductor and E&E companies.

Chemlite's target price-earnings ratio (PER) reflects a 10% discount to the average PER of semiconductor and E&E players for FY2026, as it is a support services provider.

The company is expected to experience strong growth, with its revenue compound annual growth rate accelerating from 23% (FY2021-FY2024) to 29% (FY2025-FY2027). This growth is driven by factors like Malaysia's National Semiconductor Strategy, the China+1 strategy, and Malaysia’s recent US$250 million (RM1.11 billion) deal with Arm Holdings.

Chemlite is also diversifying its customer base, particularly in non-metal plating, by onboarding new customers, which will help reduce risks. Key customers are expected to drive revenue growth, with significant increases in FY2025 and FY2026.

In terms of margins, Chemlite is expected to maintain a strong gross profit margin (40% to 50%), and improve its net profit margin to 25% to 29%.

This will be supported by new high-margin services, favourable raw material pricing, and growth in its non-metal plating segment, which is expected to contribute significantly by FY2026.

Chemlite's net profit has been steadily increasing, from RM1.65 million in FY2021 to RM9.26 million in FY2024, driven by higher-value purchase orders from two major customers. Revenue also grew, rising from RM18.40 million in FY2021 to RM34.19 million in FY2024.

Risk factors for Chemlite include dependence on major suppliers and customers, business disruptions, and absence of long-term contracts.

Chemlite aims to raise RM45 million from its IPO, which offers investors a 30% stake in the company, to fund its expansion — including acquiring new facilities, establishing clean rooms, and expanding its Malaysian operations.  

Read also:
Chemlite targets 50% revenue from non-metal plating by 2026, driven by expansion
Chemlite Innovation opens application for ACE Market IPO at 25 sen per share 
Chemlite Innovation gets approval for ACE Market IPO 
Penang-based Chemlite files for ACE Market IPO to raise funds for new facility