Cropmate Berhad (CRPMATE, 0331) is set to debut on the Bursa Ace Market on 5 Dec 2024. CRPMATE specializes in the formulation and blending of conventional and specialty fertilizers, complemented by trading straight fertilizers and related products. We project CRPMATE to register core net earnings of RM12.3m, RM15.4m, and RM17.5m for FY24F- FY26F. BUY with a fair value (FV) of RM0.32, premised on a weighted average 15x PER over FY25F EPS, aligning with comparable listed peers.

CRPMATE offers 18 standard and 14 specialty fertilizer formulations, marketed under the "Dua Daun" and "CM Miracle" brands, along with customized options for crops like oil palm and durian. Enhanced with biostimulants and microbes, these fertilizers support all growth stages, improve soil health, and boost yields, establishing CRPMATE as a trusted provider of sustainable, tailored solutions in both local and global markets. CRPMATE aims to improve efficiency by automating its weighing process with a Process Control System (PCS) and conveyor belt, reducing manual labour from three workers to one. The company is also setting up an in-house R&D lab to streamline testing, lowering costs, and drive growth of its higher-margin specialty fertilizers. All said, RM16.7m from IPO proceeds will fund the acquisition of leased factories alongside investments in new equipment and vehicles to enhance efficiencies.

CRPMATE is poised to benefit from several growth drivers in the fertilizer market. As Malaysia is a major palm oil producer, global economic growth is expected to lead to higher demand for crude palm oil (CPO) in both food and non-food segments, further driving fertilizer consumption. Prevailing strong crude palm oil (CPO) prices are expected to see higher output hence more robust fertilizer demand.

Finally, the projected surge in global durian demand especially from China, is expected to reach RM1.8bn by 2030 translating to unprecedented growth for this higher margin segment specialty fertilizers hence presents significant opportunities for CRPMATE.

CRPMATE has a dividend policy of 30% payout from its net profit. Based on our estimates, CRPMATE is expected to pay 0.6sen and 0.7sen for FY25 and FY26, translating into yields of 3.1% and 3.6%, respectively. CRPMATE currently is in a net cash position and expected to persist post IPO.

Source: Rakuten Research - 29 Nov 2024

To sign up for an account: http://bit.ly/40BNqKI

[Youtube Tutorial] Account Opening & Enable Foreign Equity: http://bit.ly/3I5Jzxo