Swift Energy Technology Bhd (SETB) is principally involved in providing industrial automation and power systems, focusing on process control, explosive proof (Ex) solar photovoltaic (PV), power distribution and other systems. The Group serves customers mainly in the oil and gas (O&G) sector as well as the grain products, edible oils and food manufacturing industries. The Group also supplies related products and services, comprising the distribution of power and industrial electrical products, and provision of technical services for process control and power distribution systems. SETB operates primarily in Malaysia (head office), Thailand, Singapore and China. Its fabrication facility is located in Shah Alam, Malaysia with branch offices in Selangor and Johor (Malaysia), Bangkok (Thailand), Singapore and Chongqing (China). Within the FY21 and 9MFY24 financial periods, SETB served approximately 550 customers across 29 geographical markets spanning the Asia Pacific, Middle East, Africa and Europe.

SETB plans significant expansions to boost capacity and competitiveness. In Shah Alam, its facilities will grow from 69,950 sqft to 156,710 sqft by 2027, including a new fabrication facility and research and development (R&D) centre. In Indonesia, SETB will establish a subsidiary in Jakarta by 2025 to support local operations and expand its customer base. By 2027, it aims to enhance production with new machinery and computer-aided design/computer-aided manufacturing (CAD/CAM) software. Additionally, a dedicated R&D team will drive innovation in Ex-rated products, including hydrogen fuel cell generators and high-capacity battery chargers. We derive a fair value of RM0.36, pegging a peers' weighted average forward PE multiple of 15x to SETB's FY25F core EPS of 2.3sen. The IPO is expected to raise approximately RM70.1m from the issuance of 250.2m new shares, with 51.0% of the proceeds earmarked for business expansion and capital expenditure.

• Growth drivers. SETB's growth will be driven by: i) expansion of fabrication, storage, office and R&D facilities, ii) expansion of operations in Indonesia, and iii) establishment of a dedicated R&D team.
• Competitive strengths. SETB's competitive strengths include: i) industrial automation and power systems expertise, ii) established track record with export capability, iii) Ex-certified solar PV modules, iv) Siemens' partnership with authorised distributorship for several brands, and v) experienced management team.
• Catalysts. Key drivers may include: i) Industry 4.0 advancements, ii) government initiatives, iii) rising investments in the O&G industry, as well as iv) global shift towards sustainable and renewable energy sources.
• Key risks. Key downside risks, among others, include: i) dependency on major user industries, ii) dependency on major suppliers, iii) regulatory requirements and certifications, and iv) foreign exchange fluctuation.

Source: PublicInvest Research - 19 Dec 2024