KUALA LUMPUR (June 4): Sum Technology Bhd may see a 39% upside when it lists on the ACE Market as the engineering services firm capitalises on a semiconductor boom, said an analyst.
Tradeview Research is recommending that investors subscribe to the initial public offering (IPO) with a target price of 39 sen. The target price would bring Sum Technology’s valuations closer to the average of its peers' forward earnings multiple of 13 times, the research house said in an IPO note.
Rising artificial intelligence demand, supply chain diversification away from China and ongoing Chinese electric vehicle investments in Malaysia are “directly benefiting” Sum Technology, Tradeview said.
Applications for the IPO will be open until June 4, and the listing is scheduled for June 18.
Based in Petaling Jaya, Sum Technology specialises in building cleanrooms and other facilities with controlled environments as well as providing mechanical, electrical, process utilities and fire protection systems.
The IPO, which consists solely of a public issue of new shares, will raise a little under RM33 million for the company’s operations and expansion in its home market as well as abroad.
There is no offer for sale of existing shares, meaning that existing shareholders are not cashing out under the IPO, “which we view positively as it signals management’s confidence in the company’s long-term growth prospects”, Tradeview noted.
Sum Technology also deserves the valuation despite its smaller market capitalisation and “slight thinner margin profile”, the research house said.
The company will likely make a net profit of RM8 million on revenue of RM83.1 million this year, according to Tradeview’s forecasts. Next year, earnings could jump to RM13.4 million on revenue of RM123 million.
The expansion in the Philippines, meanwhile, would unlock Sum Technology’s “second growth pillar” from higher-margin projects, supported by semiconductor localisation and accelerating data centre investments, Tradeview added.