• MYR0.43 FV, based on 15x FY24F P/E. Topmix intends to raise MYR25.6m from its IPO to fund business expansion and working capital. As one of the Top 3 decorative surface providers in Malaysia, it is well-positioned to benefit from the growth in commercial and residential property markets, and supportive government initiatives aimed at encouraging home ownership. Cross-selling opportunities from product expansion, geographical expansions, and allinclusive in-house solutions fuel its 3-year earnings CAGR of 17.8% (FY22-25).

• One-stop centre for renovation decorative surfaces. Topmix is dedicated to delivering environmentally-friendly decorative surface solutions to Malaysia's renovation industry. Backed by certifications like UL GREENGUARD, GREENGUARD Gold, Singapore Green Label, and MyHIJAU standards, its high pressure laminate (HPL) products offer low chemical emissions – catering to an increasingly eco-conscious customer base. Its HPL products are priced at least 40% lower than foreign counterparts. Responding to market demands, Topmix is introducing taller HPL products for seamless wall finishes in high-ceiling properties. With a vast customer base of over 1000 interior designers, the company is expanding its product range to include compact panels, PVC edging, wall panels, and other decorative solutions to position itself as a comprehensive furnishing hub for residential and commercial properties.

• Beneficiary of Malaysia’s vibrant property market. With a diverse product range of 480 designs, including approximately 190 unique and exclusive HPL designs, Topmix is poised for significant growth in the renovation sector, especially with its asset-light business model with outsourced manufacturing. As a brand owner, Topmix remains committed to introducing innovative designs aligned with evolving market trends, facilitated by collaborative efforts in product design. This expansive product portfolio positions Topmix to capitalise on the burgeoning construction and property industries in Malaysia.

• Expansion plans fuel growth. With Topmix brand dominating the largest market share in Malaysia’s southern region, the company is poised for further expansion. Plans include increasing warehouse capacity at its central region office to accommodate growth, and establishing a sales office, showroom, and warehouse in Penang to tap into the under-explored northern market. To penetrate a new market segment, the company will venture into manufacturing melamine-faced chipboard (MFC) by June. This move aims to provide costeffective surface decorative materials to both existing customers and untapped furniture manufacturers in Malaysia.

• Earnings forecast and valuation. We project a 3-year earnings CAGR of 17.8%, and ascribe 15x P/E to its FY24F earnings to derive MYR0.43 FV. The valuation is justifiable against 16x 1-year forward P/E of KLPROD on its superior ROE, net margin, and higher earnings growth. Key risks: Shortage of supplies, absence of long-term contracts, FX fluctuations, and market trend changes.

Source: RHB Securities Research - 3 Apr 2024