Minox International Group Bhd (MINOX, 0288) will be making its debut on Bursa ACE Market today. The company primarily distributes stainless-steel sanitary products for F&B, pharmaceutical, and semiconductor industries in Malaysia and across Southeast Asia under the “MINOX®” brand. Fuelled by robust demand and the launch of a new product range, MINOX has commenced its expansion initiative to satisfy customers’ requirements. We expect MINOX to register core net earnings of RM9.0m and RM11.6m for FY23 and F24 respectively. BUY with a FV of RM0.32 based on 10x PER (peers average of similar market cap) over FY24 EPS.

Starting as a trader of stainless steel sanitary valves, tubes, and fittings, MINOX has expanded its product range encompassing installation components, equipment, rubber hoses under the "MINOX®" brand, and other related items, effectively serving end-customers over a variety of industries, both locally and regionally. Presently, MINOX offers a comprehensive product range of approximately 7,480 stock keeping units (SKUs) to support its customers’ needs.

MINOX is expanding its semiconductor industry product offerings by introducing a variety of advanced vacuum fittings and valves. These products come with improved specifications, enhancing sterility and leak-tight performance. The company is allocating RM4mn from the IPO proceeds to develop and deploy specific SKUs of these new vacuum fittings and valves.

In light of the high utilisation rate of the three local warehouses, MINOX intends to build Warehouse 4 for storing extra inventories. The company has dedicated RM4m from the IPO proceeds for this construction project. Warehouse 4 will expand MINOX’s total storage capacity in Malaysia, increasing it from 1,530 units of standard size pallets to approximately 2,660 units of standard size pallets.

MINOX is planning to enter the semiconductor industry in Singapore, leveraging the country's numerous free trade agreements that work toward reducing or eliminating trade barriers like tariffs. The estimated investment for setting up the new warehouse in Singapore is around RM5m and it will significantly enhance MINOX's storage capacity in Singapore, increasing it from 289 units of standard size pallets to approximately 889 units.

Based on the 1FYY23 quarterly results, the company’s net gearing stands about 0.5x. As most of the IPO proceeds will be used to expansion, we expect the company to maintain its current gearing level. Based on the market research by Protégé Associates, the sanitary valves and fittings industry in the Asia Pacific region will reach US$643.0m in 2023 and grow at a CAGR of 6.1% to reach US$825.6m by 2027. Domestically, the industry for sanitary valves and fittings is poised for a CAGR of 11.2%, expanding from RM 234.9m in 2023 to RM363.1m in 2027.

Source: Rakuten Research - 17 Oct 2023

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