CPE Technology Bhd (CPETECH) is principally involved in manufacturing of precision machined parts and components, as well as provision of computer numerical control (CNC) machining services. CPETECH offers precision machining services to customers from a range of countries including, but not limited to, the US, Singapore, Malaysia, Germany, Japan and Thailand. Additionally, the precision-machined parts and components that the group manufactures are used across a range of industry segments including, but not limited to, semiconductor, life science and medical devices, sport equipment, sensor equipment and security. Over the years, CPETECH has established quality management system (QMS) to ensure consistent products and services, ensure customer satisfaction, and improve its products and services. CPETECH's QMS is currently accredited with ISO 9001:2015 certification from the British Assessment Bureau under the scope “provision of precision machining for electromechanical parts and its mechanical sub-assembly, worldwide”.

CPETECH intends to construct two new plants, each comprising a double-storey office building and a double-storey factory building, in Taman Perindustrian Gemilang, Johor. Besides that, CPETECH intends to purchase new machinery and equipment in order to increase its production capacity and service offerings to its customers. We derive a fair value of RM1.27 based on a 24x PE multiple to its FY25F EPS of 5.3sen. The IPO is expected to raise approximately RM179.6m from the issuance of 167.8m new shares. Besides utilising 38.8% and 18.3% of the proceeds for acquisition of land and construction of plants as well as purchase of new machinery and equipment, respectively, 26.1% of the proceeds are allocated for working capital expenditure requirements.

• Growth drivers. CPETECH’s growth will be driven by: i) construction of new plants for improved operational efficiency, and ii) purchase of new machinery and equipment for increased production capacity and service offerings.

• Competitive strengths. CPETECH’s competitive strengths include: i) longstanding relationship with its customers, ii) commitment to provide quality products, iii) experienced key management team, iv) availability of ISO Class 5 and 6 cleanrooms, v) wide range of industrial and geographical coverage, and vi) continuous investment in machinery and equipment.

• Catalysts. Key drivers may include: i) rapid evolving technological trends which has driven the expansion of end-user markets, ii) global ageing population and healthcare reforms, and iii) supportive government initiatives.

• Key risks. Key downside risks, among others, include: i) reliance on the enduser markets of its customers, ii) competitive industry, iii) dependency on its major customers, iv) dependency on skilled workers and production workers, v) price fluctuation of its raw materials, vi) fluctuation in foreign currency exchange rates, and vii) non-compliance with regulatory requirements.

Source: PublicInvest Research - 24 Nov 2023