Company Background. Techbond Group (Techbond) is a leading specialist in developing and manufacturing industrial adhesives & sealants in Malaysia. The group’s products are used across various sectors such as woodworking, paper/packaging, automotive, building/construction, personal care and mattresses. Techbond has also established a strong presence in Vietnam since 2005 and exports to more than 30 countries spanning Asia, Europe, and Africa.

Prospects. (i) Remains upbeat about the recent synergistic acquisition of adhesives & chemicals specialist - Malayan Adhesives and Chemicals - which enables Techbond to broaden its product range and explore new segments, (ii) New upstream polymerisation factory in Vietnam has commenced operations in FY21, which produces polymers for in-house adhesive production and external supply, and (iii) Focus on research & development (R&D) and boasts 8 trademarked in-house brands. This in-house capability allows for tailored products, fostering customer loyalty and a competitive edge.

Financial Performance. In 4QFY23, Techbond reported higher revenue of RM34.1mil (+28.3% QoQ) with a PAT of RM5.3mil (+80% QoQ). This was largely attributed to the contribution from recently acquired Malayan Adhesives and Chemicals, healthy orders across markets and higher foreign currency exchange gains.

Valuation. Techbond is trading at an attractive FY24F P/E of 11.2x, which is lower than its 5-year historical average of 18x and Bursa Industrial Production Index’s 23.6x currently. As a comparison, U.S.-based H.B. Fuller Co., which manufactures/distributes adhesives, sealants, coatings and other specialty chemical products worldwide, trades at a much higher FY24F P/E of 15.1x.

Technical Analysis. We believe the buying interest for Techbond is back after it pushed out from the 6-week bullish falling wedge pattern a few sessions ago. In view of the 20-day EMA staying above 50-day EMA since a bullish crossover in late-August, upward momentum may be present now. A bullish bias may emerge above the RM0.42 level, with stop-loss set at RM0.39, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM0.47, followed by RM0.50.

Source: AmInvest Research - 3 Nov 2023