Review

• PGF Capital’s (PGF) 9MFY25 core profit of RM23.2mn, after stripping out forex losses of RM3.2mn and other exceptional items, accounted for 83% of our full-year forecast. However, we consider this as within expectation as exports would tend to slow seasonally in the last quarter.

• 9MFY25 core profit increased by more than double to RM23.2mn on the back of revenue growth and margin expansion. Revenue surged 27.3% YoY to RM121.3mn underpinned by robust demand for glass wool insulation products. The rise in revenue gave rise to 12%-pts increase in PBT margin due to higher production efficiency.

• QoQ, 3QFY25 core profit was seasonally weaker at RM7.0mn compared to RM9.7mn a quarter ago. The decline was mainly due to slowdown in construction activity in Australia, leading to a drop in exports of glass wool panel. For this quarter, exports to Australia and New Zealand accounted for 73% of the group’s total revenue.

Impact

• No change to our FY25-27 earnings projections.

Outlook

• The housing crisis in Australia, which has led to spiralling home prices, remains unresolved. According to Sky News Australia, the delay in housing approval and red tape are responsible to the soaring housing prices across Australia. Looking forward, we believe the government would expedite housing approval to increase the home supply in the country. This would provide a long-term support to demand for glass wool insulation panel.

• Back home, the Energy Efficiency and Conservation Act 2024, which has come into effect since 1 January 2025, would spawn new business opportunity for PGF’s glass wool manufacturing segment. We expect the Act, which is designed to promote energy sustainability, would give rise to demand for building insulation products for effective energy management, starting from government and commercial buildings.

Valuation

• We maintain the sum-of-parts valuation (SOP) at RM3.00/share for PGF. Maintain Buy

Source: TA Research - 21 Jan 2025