PGF Capital Bhd appears to head for more upside following a 4.7% gain to close at RM2.24 on Nov 14. Forward earnings are poised to benefit from strong overseas demand. The manufacturer and distributor of glass mineral wool insulation has performed well in its financial results.

It posted a 139% year-on-year jump in net profit to RM7 million in 2QFY25 taking 1HFY25’s bottom line to RM13.7 million or an increase of 99% y-o-y. The better results are mainly due to its insulation segment, driven by strong demand from the Oceania market.

Quarterly revenue stood 40.6% higher at RM42.38 million, compared with RM30.14 million previously, mainly driven by higher sales contribution from the insulation business. Its insulation segment accounted for 99.6% of total revenue in 2QFY25, saw a y-o-y increase of 44.6% in revenue to RM42.21 million on the back of stronger demand, particularly from the Oceania market.

The remaining business segments, namely property development, investment holding and others had negligible impact on overall performance.

For 1HFY25, PGF posted a 41.4% increase ub revenue to RM82.89 million from RM58.62 million a year ago. According to consensus expectations, the company is projected to record stronger net earnings of RM27.9 million in FYFeb 2025 and RM35.8 million in FY Feb 2026.

This would translate to prospective price earnings ratios of 15.6x and 12.1x, respectively. Future earnings are expected to be bolstered by robust overseas demand, particularly from Australia. This is because of a structural change in the building code which calls for greater use of insulation and this is expected to drive increased insulation usage.

While demand is expected to remain healthy, PGF expects potential impact from the recent strengthening of the ringgit against the Australian dollar. It is also affected by a temporary shortage in skilled labour in Australia, as well as disruption caused by strike among Australian construction workers over the federal administration of its union.

Despite the challenges, PGF is in the midst of expanding its manufacturing facilities to cater to anticipated higher orders. It is buying a piece of land in Kedah for RM40 million to be developed into a factory in Kulim, Kedah, which would more than triple its annual production capacity once fully-completed in June 2028.

The first phase will see the construction of a plant that will increase its total annual insulation production capacity by 160% to 65,000 metric tonnes, from 25,000 metric tonnes currently.

Building works are expected to begin in early 2025, with commercial operations targeted for June 2026. The second phase will add another 25,000 metric tonnes, bringing the total to 85,000 metric tonnes by the first half of 2028. This expansion will also position the company to capture opportunities in other regions, as demand for energy-efficient building solutions increases.