KUALA LUMPUR (April 21): Shares of Fibromat (M) Bhd may be worth just one sen above its initial public offering (IPO) price, despite a positive earnings outlook, TA Securities said ahead of Fibromat’s listing on the ACE Market of Bursa Malaysia on May 8.
The fair value for Fibromat is 56 sen, a mere 1.8% premium to its IPO price of 55 sen per share, according to the research house’s unrated report. To begin with, there is no listed company on Bursa Malaysia directly comparable to the geotechnical services firm, the house noted.
For indirect comparison, TA Securities identified Gadang Holdings Bhd (KL:GADANG), MGB Bhd (KL:MGB), and Wawasan Dengkil Holdings Bhd (KL:DENGKIL) as the closest peers, given their “similar clientele in the same industry, with similar market dynamics”.
At the fair value, Fibromat’s earnings multiple would already be 10% above the peers’ average forward valuations, the house said.
The IPO comes at a time of uncertainty that has dragged on the broader investor sentiment. Bursa Malaysia has hosted six Ace Market IPOs since March, and all but one flopped on their first day of listing, as international trade tensions whiplashed markets globally.
Fibromat, which designs and installs geosynthetics and erosion control products, is seeking to raise up to RM17.8 million as part of its listing transfer from the LEAP Market of Bursa Malaysia. Application for the shares is open until April 25, and the company is scheduled for listing on May 8.
Based on the IPO price, Fibromat will have a market capitalisation of RM136.6 million, valuing the company at about 14 times its 2024’s earnings.
Still, TA Securities said the premium in its fair value ascribed for Fibromat is justifiable, given its positive outlook in East Malaysia, coupled with relatively higher return-on-equity, as well as profitability margin, despite smaller market capitalisation compared to its peers.
Fibromat’s earnings could be growing as much as 42% this year to RM13.8 million, driven by existing and new jobs, as well as annual growth of its trading and manufacturing businesses, according to TA Securities’ forecast.
The company also does not have a formal dividend policy, though “we believe a fair dividend payout assumption of 20% is justified, supported by anticipated stable earnings growth and positive operating cash flow in the next few years,” TA Securities noted.