PETALING JAYA: TA Research has ascribed a target price-to-earnings ratio (PER) of 10 times for the financial year ending Dec 31, 2025 (FY25), arriving at a fair value of 56 sen per share for soon-to-be-listed Fibromat (M) Bhd
(Fibro).
In an initial public offering (IPO) note, the research house said the manufacturer of erosion control products was priced at a trailing PER of 14.1 times FY24 core earnings, based on an IPO price of 55 sen per share.
“There is no listed company on Bursa Malaysia that is directly comparable to Fibro.
“Consequently, we ascribe a target PER of 10 times FY25 earnings, arriving at a fair value of 56 sen per share.
“This target PER reflects a 10% premium to its peers’ average one-year forward PER of 9.5 times.”
TA Research said it believes the premium is justifiable, given its positive outlook in East Malaysia, coupled with relatively higher return on equity as well as profitability margin, despite smaller market capitalisation compared to its peers.
It noted that Fibro is primarily involved in the manufacture of erosion control products and operates through three main segments – manufacturing, trading, and designed and implemented installation.
The company produces a wide range of products, including erosion control blankets, geotextiles and geosynthetic materials, which are used for applications such as slope stabilisation, riverbank protection and embankment protection.
In its note, TA Research said some of the company’s key advantages included customisable geotechnical solutions for diverse application, proven track record with over 26-years of experience and an experienced management team.
Its key risks were a slow down in new job replenishment, regulatory risks and project execution risks.
“The group’s revenue recorded a robust two-year compounded annual growth rate (CAGR) of approximately 25%, increasing from RM48mil in FY22 to RM75.5mil in FY24.
“This growth was driven by stronger contributions from the manufacturing and sale of in-house products and design and installation of geotechnical solutions segments.”
TA Research said consequently, core earnings improved significantly from RM3.3mil in FY22 to RM9.7mil in FY24, broadly in line with revenue growth.
The group posted a record high core net margin of 12.8% in FY24, supported by easing raw material costs coupled with effective cost-optimisation measures, it added.
Citing an independent research report by Smith Zanders, TA Research said as outlined in the company’s IPO prospectus, the geotechnical solutions industry in Malaysia, measured based on the value of work done, grew to RM3.3bil in 2024, representing a healthy CAGR of 32.1%.
“Moving forward, the industry is projected to grow by 13.6% on a year-on-year basis to reach RM3.8bil in 2025.
“This will be driven by the growth in infrastructure development, increased government spending on infrastructure construction for disaster prevention and environmental conservation, as well as urbanisation, which fuels demand for new infrastructure and infrastructure upgrades.”
