KUALA LUMPUR (Feb 9): Mercury Securities has assigned Teamstar Bhd (KL:TEAMSTR) a fair value of 30.6 sen per share, representing an 18% upside to the initial public offering (IPO) price of 26 sen.

This valuation is based on a target price-to-earnings ratio of 12.5 times the company's forecast earnings per share for the 2026 financial year (FY2026), leading the research house to recommend subscribing to the offering.

“Our target multiple reflects a 50% discount to MR DIY’s one-year Best Forwards P/E ratio, but implies a 40% premium to selected peers’ historical averages,” Mercury Securities added.

The research firm said Teamstar is set to strengthen its position in the professional hardware and home furnishings sector, driven by its aggressive retail expansion and a strong secondary property market.

While the group faces a highly competitive and fragmented industry landscape, Mercury Securities expects Teamstar’s growth trajectory to further accelerate following its upcoming listing on the ACE Market.

The group intends to strengthen its market presence by opening 10 more retail outlets by financial year 2028 (FY2028), specifically targeting rapidly developing areas such as the Johor-Singapore Special Economic Zone (JS-SEZ) to leverage the upcoming RTS Link infrastructure.

“Unlike traditional suppliers tied to slow primary construction cycles, Teamstar thrives on the high-velocity secondary property market, which accounts for 79.4% of residential transactions,” said Mercury Securities.

"With transactions hitting a near-record RM172.1 billion in 3Q2025, the group captures immediate renovation spending (typically 10%-20% of property value) as new owners modernise ageing assets," it added.

Mercury Securities said this demand is further bolstered by rising median household incomes, shifting consumer behaviour towards high-margin "lifestyle" remodeling.  

Teamstar’s core net profit is projected to grow to RM19.6 million in FY2026, up from RM16.8 million in FY2024.

This improvement is expected to be driven by its “one-stop” destination status, supported by a massive portfolio of 27,800 SKUs and 11 high-margin in-house brands.

That said, Teamstar continues to face strong competition from the likes of well-established hardware and furnishing companies in the form of Mr DIY, Ikea and Makita, to name a few.

Revenue for FY2026 is estimated to reach RM158.3 million, a significant increase from the RM130.2 million recorded in FY2024, as the group expands into the northern corridor and east Malaysia markets.

However, Mercury Securities notes that Teamstar remains exposed to global supply chain volatility and foreign exchange risks as nearly 30% of its purchases are denominated in foreign currencies.