DS Sigma Holdings Bhd (DSS -Stock code 0269) will be making its debut on Bursa Ace Market today. The company is principally involved in the manufacturing, supplying and trading in packaging materials and paper products. DSS provides multinational corporations the best possible solutions to complex challenges in their respective industries. From industrial to consumer packaging, DSS’ clients rely on the highest quality packaging materials that protect their assets and cargo throughout the entire supply chain. The company plans to set up a packaging design and innovation centre and expanding its testing and prototyping facilities by investing in new testing equipment to facilitate its front-end valueadded services. We expect DSS to register net earnings of RM22.9m and RM27.3m for FY6/23 and FY6/24 respectively. BUY with a TP of RM0.80 based on 14x PER (average PER of its regional peers at similar capacity and market cap) over FY24 EPS.

DSS has 3 operational facilities located at Klang and Puchong in Selangor, and Nilai in Negeri Sembilan with a total built-up area of approximately 100,973 sq. ft. They have an annual production capacity of 26.09m pieces of carton blanks for flexographic printing machines and 8.7m pieces of die-cutting sheets for automatic die-cut machine. DSS’ future plan is to fully automate the production of corrugated cartons and plans to install automated and robotic packing machines for its existing production lines over the next 2 years.

The company is planning to expand its business operations to Penang to target new customers located in the northern region of Peninsular Malaysia by renting a warehouse cum office with the approximate size of 25,000 sq. ft. in Batu Kawan, Penang by 1H2023.

For capacity expansion, DSS is planning to establish a new head office and factory in Klang, Selangor by acquiring a detached factory with 2- storey office building with an estimated built-up area of 100,000 sq. ft. by 1H2024.

Presently, DSS mainly serve customers in the consumer durable electronic goods sub-sector of the E&E industry where the packaging products are used for air-conditioners, televisions, microwave ovens, as well as their respective parts and components. Moving forward, the company plans to expand its target markets to serve customers within the E&E industry focusing on the solar photovoltaic (“PV”) and medical devices industry.

DSS does not have any formal dividend policy. Distribution of future dividends will depend on the financial performance of the company. DSS has a strong balance sheet with net cash of RM21m as at FY6/22. Proceeds from IPO will be mainly used for business expansions.

Source: Rakuten Research - 6 Jan 2023