EPB Holdings Berhad (EPB, 0317) is debuting on the Bursa Ace Market today. Specializing in providing integrated food processing and packaging machinery solutions, EPB's core products include food processing machinery, flexible packaging materials, and cellulose casings. BUY with a fair value of RM0.76 based on FY25F PE of 15x, in line with industry peers.

EPB's prowess lies in its ability to deliver end-to-end solutions, encompassing from innovative design and precision customization to seamless integration and automation. This holistic approach has solidified EPB’s standing as a pivotal player within the food manufacturing ecosystem, catering to a broad spectrum of industry leaders.

EPB has recently embarked on significant expansion plans, including the development of a new corporate office and factory in Penang, with an estimated space of 70,000 sq ft. This new facility will enhance its manufacturing capabilities, warehouse capacity, and provide space for a dedicated showroom. This expansion is expected to drive efficiency and meet the increasing demand for EPB’s solutions.

Additionally, EPB is investing in new machinery to bolster its in- house manufacturing capabilities, a move that is expected to increase production output and reduce reliance on third-party suppliers. This strategic initiative is anticipated to improve margins and enable the company to capture a larger market share in the growing food processing industry.

EPB’s strategic vision extends beyond its domestic market, with a calculated expansion into the dynamic Southeast Asian region, particularly the Philippines and Indonesia. These burgeoning markets, characterized by rapid urbanization and a swelling middle class, present a lucrative opportunity for EPB’s advanced food processing technologies. The Philippines’ food processing industry, projected to grow at a robust CAGR of 7.5% from 2023 to 2027, and Indonesia’s, with an even more impressive CAGR of 8.2%, offer abundant opportunities for EPB’s expansion. By establishing a strong presence and forging strategic alliances in these regions, EPB is positioning itself as a market leader and drive the next wave of growth within the ASEAN food processing sector.

As such, we expect FY23-FY26F earnings to grow at a robust CAGR of 16% underpinned by (i) the expansion of manufacturing capabilities, (ii) the growing demand for integrated food processing solutions, and (iii) the increasing adoption of automation and robotics in food manufacturing. Finally, EPB has a healthy balance sheet, with a gearing ratio of 0.01x as of Dec FY23, a status expected to persist post IPO.

Source: Rakuten Research - 23 Aug 2024

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