Winstar Capital Berhad (WINSTAR: 0336) operates in three key areas: (i) aluminium extrusion and fabrication, including aluminium ladders and solar PV mounting structures, (ii) trading and distributing building materials like aluminium profiles, stainless steel products, and silicone sealants, and (iii) solar PV system installation services. About half of the IPO proceeds is allocated for expansion as the company anticipates strong demand going forward. As such, we project net earnings of RM13.4m and RM15.0m for FY25-FY26. BUY with a FV of RM0.60 based on a PER of 13x (about 20% discount to sector average due to its smaller market cap) over FY25 EPS.

WINSTAR has a comprehensive distribution network and over 3,400 SKUs in its building materials segment. The company has formed a partnership with Sunview Group Berhad to expand its solar PV system installation services and plans to expand its solar- related business, including fabricating aluminium solar PV mounting structures.

The company aims to increase market penetration, particularly in renewable energy solutions, by bidding for larger-scale solar PV installation projects. Additionally, the company intends to diversify its product offerings and strengthen operational efficiencies through digital transformation.

The aluminium and renewable energy sectors are poised for growth, supported by global sustainability initiatives and increasing demand for solar PV systems. Malaysia’s construction recovery and supportive government policies further enhance the industry's potential.

With a strong emphasis on sustainability and innovation, WINSTAR is poised to play a significant role in Malaysia’s economic growth while delivering value to its shareholders.

With net gearing at a high 0.85x as of 9MFY24, we are cautious about WINSTAR’s financial position. However, the allocation of 30% of IPO proceeds for working capital, coupled with increased shareholders’ capital and stronger earnings for FY24 onwards, should lower net gearing to approximately 0.5x post-FY24. The company has a dividend policy of a 30% payout ratio, and we expect WINSTAR to pay 1.0sen-1.6sen for FY24-FY26, translating into yields of between 3.0% and 4.4%.

Source: Rakuten Research - 18 Dec 2024

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