Master Tec Group Bhd (MTEC) is primarily a manufacturer of a wide range of quality low voltage (LV) power cables, control and instrumentation cables, as well as other related products for various end-user markets, including power utility, renewable energy, property development and construction, oil and gas, infrastructures, public transportation, manufacturing, industrial, commercial and electrical and electronic (E&E). The wires and cables manufactured by the group are made-to-order in accordance with the specifications detailed in the purchase orders received from its customers. As at 29 Nov 2023, MTEC is a registered LV power cable supplier with the Ministry of Finance (MOF) for government-related projects in Malaysia. Having obtained the Certificate of Product Acceptance from Tenaga Nasional (TNB) for its aluminium-cored LV power cables, MTEC is also a certified supplier of LV power cables to power utility companies in Malaysia such as TNB, Sabah Electricity S/B (SESB) and Sarawak Energy Bhd (SEB).

Besides expansion of its market coverage through export sales, MTEC intends to venture into the manufacturing of medium voltage (MV) power cables for power distribution purposes catering to customers from various end user markets, including but not limited to power utility, solar photovoltaic (PV), industrial parks, commercial buildings and public transportation. We derive a fair value of RM0.48 based on a 16x PE multiple to its FY24F EPS of 3.0sen. The IPO is expected to raise approximately RM61.7m from the issuance of 158.1m new shares. 66.8% and 26.4% of the proceeds are allocated for capital expenditure and general working capital, respectively.

• Growth drivers. MTEC’s growth will be driven by: i) new venture into the manufacturing of MV power cables with construction of news plants and purchase of new machineries and equipment, as well as ii) expansion of market coverage through export sales.

• Competitive strengths. MTEC’s competitive strengths include: i) being an established wire and cable manufacturer with a reputable brand name and proven track record, ii) established manufacturing facilities with effective production planning and management, iii) experienced key senior management, iv) balanced portfolio of customers, and v) emphasis on the quality of its products.

• Catalysts. Key drivers may include: i) an expanding national grid, ii) rising urbanisation, iii) rising infrastructure spending, iv) power cable replacement, v) promotion of electric vehicle infrastructure, vi) increase in the industrialisation process.

• Key risks. Key downside risks, among others, include: i) competitive industry, ii) fluctuations in the prices of its major raw materials, iii) dependency on foreign workers for its manufacturing activities, iv) increasing concentration risk to a single customer, and v) foreign exchange fluctuations.

Source: PublicInvest Research - 18 Jan 2024