Review

• PGF Capital’s (PGF) 1QFY25 earnings accounted for 15.3% of our fullyear forecast. However, we consider this as within expectation as FY25 earnings is expected to be back-end loaded with a lumpy land sale gain.

• 1QFY25 core profit grew 59.5% YoY to RM6.4mn on the back of 42.2% rise in revenue. The decent performance can be attributed to proliferation of glass wool insulation demand, which led to higher production efficiency. For this quarter, the core profit margin rose 2%- pts to 16%.

• QoQ, 1QFY25 core profit rebounded strongly from the seasonally low RM4.7mn recorded in 4QFY24. Note that demand would tend to pick up in Australia after the Christmas and New Year periods.

Impact

• No change to our FY25-26 earnings projections.

Outlook

• Looking forward, we expect the manufacturing division to propel FY25-26 earnings higher, underpinned by stringent housing requirements in Australia as well as the roll-out of infrastructure projects such as LRT and airport expansion in Penang.

• The proliferation of demand will require the company to heed an expansion plan due to shortage of capacity. The company is in search of land in Kulim or Banting, or even considering converting the existing warehouse in Seberang Prai to make way for the additional capacity.

Valuation

• We maintain the sum-of-parts valuation (SOP) at RM2.76/share for PGF. Maintain Buy

Source: TA Research - 30 Jul 2024