Background

Mega Fortris is principally involved in design and manufacturing of security seals, and trading of related products and services. It has two manufacturing facilities in Selangor, providing a combined annual production capacity of 551mn pieces of security seals, comprising plastic seals, container seals, cable seals, and security bags.

IPO Statistic

The IPO entails an offering of up to 295.7mn shares in conjunction with the listing of the share on the Main Market of Bursa Malaysia. It comprises a public issue of 147.9mn new shares and an offer for sale of up to 147.9mn existing shares. Of the total 147.9mn public issue, 42.3mn will be offered to Malaysian public, while 25.4mn will be offered to eligible employees and persons contributed to the success of the company, 38.0mn to Miti-approved Bumiputera investors and 42.2mn to selected placees, at an IPO price of RM0.67 per share.

Investment Thesis

1. Size Matters in Manufacturing of Security Seals;

2. Minimal Consumer Concentration and Forex Risks; and

3. Experienced Management Team.

Forecast

We Expect FY25 and FY26 Earnings to Grow at 115% and 24% respectively premised on the following assumptions:

1. FY25-26 Revenue Growth of 15-23% From Increasing Export Orders. The Capacity Utilisation Is Expected to Increase to 85-86%;

2. FY25-26 PBT Margin to Improve by 5-6%-pts Due to Higher Operational Efficiencies; and

3. 30% Dividend Payout in FY25 and FY26.

Valuation

At the IPO price of RM0.67/share, Mega Fortris is priced at a trailing PE of 32x FY24 EPS. We Value Mega Fortris at RM0.75/share Based on 15x CY25 EPS. Not Rated.

Source: TA Research - 29 Oct 2024