PGF Capital expected to post strong 4Q earnings

PETALING JAYA: TA Research forecasts solid profit for PGF Capital Bhd in its fourth-quarter financial results for the financial year ended Feb 29, 2024.

The research house expects the quarterly profit to be around RM2mil to RM3mil, considering the seasonally weak demand for insulation products in Australia due to slower construction activities during festive seasons.

“Comparing this with the previous year’s corresponding quarter, it would be a turnaround from a core loss of RM4.6mil,” said TA Research.

In addition, the research house is anticipating PGF Capital to declare a final dividend of 2.1 sen per share, or a quarter of its profit to meet its 25% dividend payout policy.

TA Research has maintained its “buy” call on the counter with an unchanged target price of RM2.76.

Following a meeting with PGF Capital, TA Research said the company’s joint-venture (JV) had recently leased a warehouse in Sydney measuring 3,300 sq m to store the glass wool for distribution to local customers.

“One of PGF Capital’s distributors has participated in the new Western Sydney International Airport project, which would require an estimated 300 tonnes of glass wool for insulation purposes,” it said.

The distributor had already supplied 20% of the requirement last year and will supply the rest from now until end-2025, TA Research added.

On production expansion plans, the group is eyeing converting its existing warehouse in Seberang Perai to a manufacturing facility and acquiring a warehouse in a different location, TA Research said.

The group shared that it is also searching for land in Banting or Kulim for expansion purposes. This would require a total capital expenditure of about RM200mil, which is twice as much as for converting the existing warehouse.

TA Research said that the expansion plan should be expedited, as the implementation of the Penang light rail transit (LRT) project had recently received the green light from the government.

“It would be a big opportunity cost if PGF Capital fails to supply the insulation products to the 20 LRT stations on its home turf, simply because of production constraints,” the research house said.

TA Research expects some of the disposal proceeds to be ploughed back to PGF Capital later via the conversion of preference shares by PGF Capital chairman Fong Wah Kai and his family.

The research firm shared that there were sales of 10.82 million shares in an off-market deal worth RM18.39mil that would bring new investors to the group and additional capital to fund capacity expansion.

According to TA Research, the implementation of the Automotive High Tech Valley (AHTV) to transform Tanjung Malim into an automotive hub is taking shape gradually.

“The full development of the AHTV will bode well for PGF Capital, given its significant 1,311-acre land bank next to the AHTV,” it said.

Regarding PGF Capital’s Tanjung Malim development, its JV partner, Malvest Properties Sdn Bhd, is awaiting approval from the authorities for the initial launch of the 45-acre JV development. It comprises serviced apartments, shop lots and 1.5-storey terrace houses with an estimated gross development value of RM135.9mil.