Stock Analysis and Valuation by TA Securities

- Target Price: RM1.08/share, derived from a target price-to-earnings ratio (PER) of 15x against the CY25 earnings. This valuation reflects the company's strong earnings growth prospects driven by horizontal integration and new business acquisitions.

- Market Cap: RM276.9 million, with a total share capital of 361.9 million shares and a 52-week high/low of RM0.97/RM0.75.

- Sector: Building Materials

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Core Business and Market Position

- Core Business: Econframe Berhad (EFRAME) is a comprehensive door set solutions provider, including metal door frames, fire-rated door sets, and trading wooden doors and ironmongery.

- Market Position: EFRAME commands approximately 60% of the market share in metal door frame production in Malaysia, with a client base of over 700 domestic property developers and contractors.

Synergistic Business Expansion

- Acquisition: EFRAME's acquisition of a 65% stake in Lee & Yong Aluminium Sdn Bhd (LYASB), specializing in aluminium fabrication and glass products, contributes to synergistic growth.

- Profit Guarantee: The acquisition comes with a minimum profit guarantee of RM4 million annually for FY24-FY26, suggesting significant revenue growth.

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Order Book and Capacity Expansion

- Current Order Book: EFRAME's order book stands at approximately RM80 million, supported by its production capacity of 55,000 units per month, operating at a 70% utilization rate.

- Capacity Expansion: Plans to acquire additional land to increase LYASB's capacity by 40% further strengthens EFRAME's production capabilities.

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Procurement and Margin Stability

- Stable Margins: EFRAME maintains a strong gross margin, averaging 33% from FY19 to FY23, through effective procurement strategies and flexible pricing.

- Raw Material Management: The company adopts proactive measures to mitigate commodity price fluctuations, like adjusting prices based on market trends and strategically increasing steel inventory during price declines.

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Expansion into Construction Sector

- Industrial Property Construction: EFRAME proposed acquiring a 70% stake in ETA World Sdn Bhd (ETA), which specializes in industrial property construction, with a current order book of RM200 million.

- Projected Earnings: With a guided net margin of 12%, ETA is expected to contribute significant net earnings to EFRAME in FY25/26F.

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Sound Financial Position

- Net Cash: 

EFRAME holds RM26.7 million in cash, with total borrowings at RM8.2 million, leading to a net cash position. However, post-ETA acquisition, the company's gearing ratio may shift to 0.1x.

- Earnings Forecast: EFRAME's revenue and core earnings are projected to grow at a 3-year CAGR of 39.4% and 40.8% to RM205.4 million and RM36.6 million by FY26F, primarily due to horizontal integration and cross-selling opportunities.