KUALA LUMPUR (June 18): Pan Merchant Bhd (KL:PMIBHD), en route to the Ace Market, deserves premium valuations due to its operating cost and product price advantage over its international peers, said Malacca Securities.
The house values the industrial filter manufacturer at 33 sen, a 22% upside from its initial public offering (IPO) price of 27 sen per share. The valuation is based on 25 times forward earnings, which Malacca Securities says is fair as the Bursa Malaysia Industrial Index trades at multiples of 24 to 35.
“We believe the higher valuation is justified,” Malacca Securities said, even as the multiple pegged is higher than that of its international peers that trade at an average of 15 to 18 times.
Applications for the IPO closed on June 17 and the company is scheduled for listing on June 26.
Malacca Securities is offering a dissenting view of Pan Merchant’s IPO from that of TA Securities and Public Investment Bank. Both houses said the IPO price of 27 per share overvalued the company.
Pan Merchant is mainly involved in manufacturing filters for solid-liquid filtration and the provision of steel works as well as technical support services. The filters are mainly used to separate solid particles from slurry in industries such as edible oil, industrial wastewater and food processing.
More than 80% of its products manufactured at its three facilities in Ipoh, Perak, are exported to Asia, Europe, the Americas and Africa. Edible oil currently accounts for almost 90% of Pan Merchant’s total revenue in 2024.
Unlike its European counterparts, Pan Merchant incurs significantly lower production costs while delivering similar products, Malacca Securities said.
“This cost advantage should not only support the group’s target global market share of 1%-2% through competitive pricing but also bolster its ongoing global expansion efforts,” the house said.
Pan Merchant is also Malaysia’s largest solid-liquid filtration firm by revenue, further reinforcing its strong market position, Malacca Securities noted.
The house is projecting an average annual growth of 17% over the next three years, with core net profit climbing to RM10.8 million by this year end and RM15.8 million by 2027, supported by market share expansion, focus on non-edible oil industries and new products for the mining industry.