BWYS Group Berhad (BWYS, 0313) is debuting on the Bursa Ace Market today. The company specialises in manufacturing sheet metal products and supplying scaffoldings that are certified for standard compliance by CIDB. Given the expansion of capacity, the rollout of new products, and increasing demand for building materials, we foresee BWYS posting net earnings of RM22.3m and RM27.6m for FY24 and FY25, respectively. BUY with a fair value of RM0.40 based on a 15x PER, (3-year peer’s average of similar scale) over FY25 EPS.

BWYS manufactures sheet metal products comprising of Long-Run Roofing Sheet, Uroll Bond Roofing Sheet, Crimp Curved Roofing Sheet, C-Purlin and Battens for residential, commercial, and industrial buildings with total production capacity of 138,747MT and warehouse capacity of 13,183 sq ft. The company also provides industrial racking solutions, including design and layout, manufacturing, delivery, installation, and inspection for warehouses and manufacturing facilities.

The company is set to expand its operations and boost production capacity with a new factory in Penang, covering a total built-up area of approximately 197,153 sq ft. The new facility will include a double-storey factory and office, a single-storey warehouse and office, and will house a continuous PU foam sandwich panel production line, a new automated powder coating line for industrial racking systems, and existing machinery from the Penang 1572 and Penang 1571 factories. Additionally, BWYS will acquire new machinery, including roll forming machines for the Banting factory and equipment for roof truss and industrial racking system manufacturing. Upon completion, the Penang factory will increase the company’s production capacity to 147,147MT and warehouse capacity to 150,231 sq ft.

BWYS plans to enhance its ICT infrastructure by implementing a new ERP system and production and inventory management systems, which will facilitate better tracking and tracing of incoming raw materials and finished products, thereby improving production workflow.

Moving forward, BWYS is set to diversify its roofing product offerings by venturing into the production of PU foam sandwich panels especially for resellers such as hardware wholesalers and retailers.

As at 1QFY24, the company has a net gearing of 0.63x. As the proceeds from IPO will be used to expand its businesses and repayment of borrowings, we expect BWYS’s net gearing to reduce to about 0.5x by end of FY24. Though the company does not have a fixed dividend policy, we expect BWYS to pay dividend of 0.4sen and 0.5sen for FY24 and FY25 assuming a 20% payout ratio. This will translate into yields of 2.0% and 2.4% respectively.

Source: Rakuten Research - 22 Jul 2024

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