Results preview

PGF Capital (PGF) is expected to announce its 3QFY25 results performance this month. We expect the quarterly profit to come in the range between RM6mn and RM8mn for 3QFY25, boosting the cumulative 9MFY25 profit to RM22.2mn-24.2mn or 79-87% of our full-year estimate.

Generally, we are anticipating a flat earnings growth in 2HFY25 due to capacity constraint. In addition, the maritime trade and construction activities would tend slow in Australia during this period in conjunction with year-end festivities, hampering the sales growth potential of glass wool insulation products. As far as the selling price is concerned, we expect the price of glass wool to remain elevated at RM6.60/kg for 2HFY25.

Updates

Kulim’s plant progress on track. PGF’s capacity expansion project in Kulim East is on track to meet the completion by 1Q26 (4QFY26). We understand that the land has already been cleared and flattened for construction works to begin soon. We reiterate that the expansion, which will increase its annual production capacity to 65,000mt from 25,000mt currently, would be the engine of growth for FY27 and beyond.

KHTP development would begin in 2026 (FY27). With regards to Kulim High-Tech Park (KHTP) housing development project, we project the progress billing from this RM600mn GDV project to begin from FY27 onwards (see report dated 11 Dec 2024). In essence, we expect the project launch to begin right after the completion of land acquisition exercise this year.

Electricity tariff impact. Meanwhile, we do not think there would be a significant earnings impact from higher electricity cost as we believe it could be fully passed on to the consumers. As Tenaga announced that the increase in base tariff for RP4 would only take place in 2H25, PGF and its customers would have sufficient time to adjust the pricing and costing resulting from the tariff adjustments, in our opinion. Likewise, we also do not believe the increase in energy cost would derail PGF’s export competitiveness, which is supported by its core competency in cost management and production efficiency. Note that the energy cost makes up approximately 30% of PGF’s total cost of production.

Forecast

No change to our FY25-27 earnings projections.

Valuation

We maintain the sum-of-parts valuation (SOP) at RM3.00/share for PGF (Figure 1) with a ESG rating of 3-star. At RM3.00, the implied PE of 16x CY25 EPS is considered fair for an investment in a carbon-neutral company, which will stand to gain from robust demand and regulatory support in future. Maintain Buy

Source: TA Research - 16 Jan 2025