Cosmos Technology International Bhd (CTIB) wholly owns Cosmos Instruments S/B (Cosmos Instruments) and Marc Conleth Industries S/B (MCI). Being a certified partner and solution partner of Siemens Malaysia S/B (Siemens Malaysia) as well as an official partner of LACROIX Sofrel in Malaysia, Cosmos Instruments specialises in the distribution and instrumentation services of fluid control and telemetry products such as Siemens’ electronic flowmeters and related products, Sofrel’s dataloggers and centralised monitoring systems for the group's customers in the water and wastewater industries. On the other hand, MCI possesses the technical knowledge, experience and capabilities in metal fabrication to produce quality fabricated metal products for various industries such as water, wastewater, as well as oil and gas, of which majority of its manufactured products are produced for the oilfield equipment and service companies. Moving forward, CTIB intends to consolidate Cosmos Instruments’ and MCI’s management, operations and production space in a new building at one single location. Besides that, MCI intends to purchase several new machineries for both enhancement of its manufacturing output and expansion of its manufacturing capability. We derive a fair value of RM0.40 based on a 12x PE multiple to its CY23F EPS of 3.4sen. The IPO is expected to raise approximately RM22.4m from the issuance of 64.1m new shares. Besides utilising 19.8% of the proceeds as working capital, 44.6% and 15.6% of the proceeds are allocated for acquisition of New Building and purchase of new machineries, respectively.

• Growth drivers. CTIB’s growth will be driven, amongst others, by: i) acquisition of a new building, and ii) purchase of new machineries.

• Competitive strengths. CTIB’s competitive strengths include: i) being a certified partner and solution partner of Siemens Malaysia, ii) being an official partner of LACROIX Sofrel in Malaysia, iii) possession of metal fabrication and customisation capabilities, iv) experienced management team, v) provision of quality products and services, as well as vi) proven track record.

• Catalysts. Key drivers may include: i) upgrading and building of water treatment plant, ii) replacement of aging water pipes, iii) government's intention to lower national non-revenue water (NRW) level, and iv) substantial capital expenditures invested to monetise new oil and gas discoveries.

• Key risks. Key downside risks, among others, include: i) competition from other industry players, ii) dependency on the performance of the oil and gas as well as the water and wastewater industries, iii) foreign exchange fluctuation, iv) susceptibility to the availability and volatility in prices of its raw materials and supplies, v) dependency on Siemens Malaysia, vi) dependency on its major customers, and vii) potential termination or non-renewal of partnership agreements.

Source: PublicInvest Research - 22 Sept 2022