Rakuten Trade Research Reports

Author: rakutentrade   |   Latest post: Wed, 19 Feb 2020, 5:26 PM


Techbond Group Bhd - An everlasting bond

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Techbond Group Bhd ("Techbond") which was the last Main Board listing in 2018 has seen its share price surged to a high of RM1.02. However, it has since corrected to an attractive level hence we are calling a BUY with target price of RM1.03 based on 13x PER FY20 as per the higher range amongst small cap index. 

Tech bond enjoy a respectable net profit morgins of about 15%, with facilities located in Shah Alam, Malaysia and Vietnam where their industrial adhesives are predominantly used in woodworking (largest segment) followed by paper packaging. Its' applications are also used in book binding, consumer products, building & construction and automotive. Techbond's major clients are mostly long term with 7-14 years of relationship. 

Techbond is Malaysia's only listed industrial adhesive and sealant manufacturerand there is no directcomporisonas their closest competitors such as H8 Fullerare global MNCs. 

Techbond has earmarked RM5.9m for its Shah Alom plant expansion and is expected to be operational by 03 2019 while RM28.8m has been allocated for additional factory in Vietnam commencing in 20 2020 producing polymers, key material for adhesive. Current capacity of 21,372 MT is expected to reach 33,914 MT by 2020 and the new polymer capacity of 4,628 MT (from Vietnam) will reduce dependencies from external suppliers amid improving morgins. 

Techbond's financial strength remains sound as they are in net cosh position with funds raised from its IPO are used for plant expansion which will see continued growth for the next couple of years. As at 02FY19, it has RM67.5m in cash (RM0.29 per Share). We remain positive on their prospectsand estimated EPS to grow by 30% for FY2020 as their capacity expansion is driven by rising demand in Vietnam.

Source: Rakuten Research - 11 Mar 2019

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