CEO Morning Brief

Techbond Group Shares Up 30% to Over Three-year High

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Publish date: Wed, 19 Jun 2024, 09:56 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (June 18): Shares of Techbond Group Bhd (KL:TECHBND) soared on Tuesday to its highest in more than three years after conglomerate PPB Group Bhd (KL:PPB) bought a 15% stake in the adhesive manufacturer.

Techbond rose as much as 30% or 13 sen to 56.5 sen in the morning trade session, its highest since March 2021. The stock closed at 52 sen, still up by 8.5 sen or 19.5%, valuing the company at RM282.38 million.

The counter was also highly active, with more than 51 million shares changing hands, again the highest in more than three years.

PPB, a diversified conglomerate controlled by Malaysian tycoon Robert Kuok, emerged as a substantial shareholder in Techbond last Friday after acquiring over 82.9 million shares and over 34 million unexercised warrants in the company from Sonicbond Sdn Bhd via a direct business transaction for RM37.67 million.

The shareholding will remain the same, PPB said, if it exercises all its warrants and assuming all other warrants are also exercised, but its total consideration for the acquisition will increase to RM48.9 million.

The shareholding of Sonicbond, which is the private vehicle of Techbond managing director Lee Seng Thye, will reduce to 54.39% after the disposal of the shares to PPB.

"Techbond's significant business operations in the manufacturing of adhesives and sealants are expected to benefit from global industrial growth in various sectors such as construction, automotive, woodworking, and packaging industries," PPB said on Friday, stressing that the investment is intended to be a long-term strategic holding.

The only research house covering Techbond is Kenanga Investment Bank Bhd, which recently initiated its coverage on the company on April 17 at 39 sen, with an “outperform” rating and a target price of 45 sen.

Kenanga said it likes Techbond for its customer-centric, solution-provider and manufacturer model strong customer base across both consumer and woodworking sectors, and diverse and growing presence in Southeast Asia, strengthened by the integration of its upstream and midstream operations, and the recent expansion with the acquisition of Malaysian Adhesives and Chemicals (MAC).

Interestingly, MAC is a half-century-old adhesive and chemical firm that was acquired by Techbond from PPB last year.

Kenanga, which has an "outperform" rating on PPB with a target price of RM17.50, said the stake acquisition is earnings accretive for PBB as the shares were bought below the research house's target price on Techbond.

On the other hand, Kenanga said Techbond is getting a strong strategic partner in PBB with its extensive regional operations, including a strong presence in China and India, as well as a global network.

"We see the deal as more of a vote of confidence from PPB to Techbond," it said.

Techbond's net profit for the first nine months of FY2024 nearly doubled to RM11.5 million from RM5.75 million in the same period of FY2023, with revenue increasing 50.74% to RM112.6 million from RM74.8 million. This is the group's best-ever topline and bottomline performance since its listing in 2018.

Source: TheEdge - 19 Jun 2024

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