Company Note New Listing. Fibon Berhad. Not to Subscribe. Par Value. RM2.20 (cum-bonus issue) (-19.4%) RM0.68 (ex-bonus issue) (-20.

Transcription

1 Company Note New Listing Friday, 05 December 2008 For Internal Circulation Only KLCI : Sector : INDUSTRIAL 05 December 2008 Bloomberg : FIBON MK Fair Value RM2.20 (cum-bonus issue) (-19.4%) RM0.68 (ex-bonus issue) (-20.0%) Not to Subscribe SHARE INFO Stock Code n.a. Listing Mesdaq Enlarge Share Cap (mn) 98 Market RM Par Value RM0.10 Offer for Sale (mn) Issue Price RM RM2.73 Oversubscription Rate n.a Estimated Free Float (%) n.a. Tentative Listing Date 18-Dec-08 Major Shareholders (%) Pang Chee Khiong % Pang Fok Seng % Analyst : TA Research E- :stchin@ta.com.my : ext 1634 Fibon Berhad Not the Right Time Fibon Berhad (Fibon) is formulator of advanced composite materials and manufacturer of electrical insulators. The Group was incorporated on 25th March 2008 as a public limited company. The history of the Fibon dates back to 1992 when it managing director, Pang Fok Seng founded the production of isulation material business under CPC Polyply. Through it's wholly owned subsidiary, Hexa Analisa Sdn Bhd (Hexa Analisa), the group is principally involved in the formulation of advanced polymer matrix fibre composites, manufacturing and sales of electrical insulators, electrical enclosures and meter boards. With the listing in Mesdaq Market, the group plans to expand its overseas market share despite global economic uncertainties. The founder has strong background in the advanced polymer matrix fibre composites industry. RATIO & ANALYSIS FY09 NTA/share (Post IPO) (RM) 0.07 RM0.85 (x) 12.1 Proforma ROE - FY % Proforma ROA - FY % Net Gearing (x) Net cash Proforma Current Ratio 1.32 UTILISATION OF PROCEEDS RMm % R&D % Purchase of machineries % Geographical expansion % Working capital % Estimated listing expenses % Total % EARNINGS SUMMARY (RMm) FYE MAY F 2010F Revenue EBITDA PBT Tax Minority interests Net Profit EPS (sen) Net DPS (sen) na na na na na na Net Dividend Yield na na na na na na PER (X) Sales Growth (%) EPS Growth (%) EBITDA Margin (%) PBT Margin (%) Net Margin (%) Tax Rate (%) TENTATIVE LISTING DATES Event Opening of the IPO Closing of the IPO Balloting of Applications Allotment of Shares Listing Tentative Date 24-Nov Nov Dec Dec Dec-08 Fibon Berhad [ 1 ] New Listing

2 Year Key Achievements/ milestones of Fibon 1992 SIRIM research and develop composite materials in PROTON Fibon participated in joint research with SIRIM and formed the composite research team in Pusat Teknologi Bahan st DMC was developed in Malaysia st Fibon composite was developed for use in Changi Airport 1997 FIBON 2040 polymer matrix composite was developed & certified under ASTA Certification 1998 FIBON CT Clamp was developed 2000 FIBON GP600 was developed for SIEMENS FIBON CS640 was developed with high fire retardant up to 1000 Celsius for 1 hour 2004 Halogen-free" advanced polymer matrix fibre composite Filed patent for polymer compound formulation 2004 Awarded Pioneer Status by MITI 2006 Discovery of oil palm trunk as new resource of reinforcement material 1st prototype of polymer-based material in physical form based on oil palm trunks 2008 Fibon material used in nuclear power plant in China Pending listing on the MESDAQ Market of Bursa Malaysia Securities Berhad Source: Prospectus CORPORATE STRUCTURE The figure below illustrates the Group's corporate structure: Fibon Berhad 100% Hexa Analisa BUSINESS DESCRIPTION Fibon is principally engaged in the formulation of advanced polymer matrix fibre composites, manufacturing and sales of electrical insulators, electrical enclosures and meter boards. The diagram below depicted the overall structure of the overall structure of the materials industry and where Fibon operates in. Advanced polymer matrix fibre composites can be classified into thermoset composites and thermoplastic composites in which thermoset composites exhibit superior properties than that of thermoplastic. All the advanced polymer matrix fibre composites produced by Hexa Analisa are thermoset composites. Fibon's technology enables the developments of new composite materials to replace traditional materials for critical environment usage. The properties of Fibon's new materials can overcome certain weaknesses of traditional materials in area such as tensile strength, melting point, flammability and etc. All their advanced polymer matrix fibre composites are mainly used to produce insulation components and parts for application in the electrical industry such as insulation components and parts for generators, switchgears, switchboards, circuit breakers as well as turbines for generators. Fibon Berhad [ 2 ] New Listing

3 Product Types Vertical Fixed Mounting CORE PRODUCTS Application Insulation for main bus-bars in electrical switchboards for industrial applications Protection between 4kA up to 10kA. GP600 Insulation for main bus-bars in electrical switchboards used by Siemens Protection up to 7,400A. Flat Bar Basic material to fabricate into finished products Protection up to 10kA Distribution Bar Providing insulation for dropper busbars suitable up to 4kA Sheet Insulation and partition in low and medium voltage switchboard Protection up to 1kA DMC Insulation and partition in low and medium voltage switchboard Protection up to 1kA Metering Board Use as mounting base for electrical measuring equipment Source: Company Fibon Berhad [ 3 ] New Listing

4 Fibon's insulation materials are currently used in electrical equipment for projects such as electrical power management systems at airports, hydroelectric dams, power stations, sub0stations, electrical train systems and nuclear power plants where high amperage insulation materials are required. The diagram below depicted where electrical insulation materials are used: Source: Company The overseas market contributed approximately 83.2% of the Group's total revenue for FY08 while the remaining was generated by local market. Singapore is the biggest contributor to its overseas business. Australia 10.0% Vietnam 2.4% Overseas Contribution South Africa 3.1% Others 2.8% Singapore Market Shares for High-Amperage elctrical Insulators. Fibon 31.8% Thailand 4.1% Indonesia 15.5% Singapore 62.1% Others 68.2% Fibon Berhad [ 4 ] New Listing

5 MAJOR CUSTOMER Fibon has four key customers who individually contributed 10% or more to the Group's revenue. The key customers, S-Team Switchgear Pte Ltd, Team Industrial Supplies, PT Siemens Indonesia and C.M.R (Far East) Pte Ltd have collectively contributed approximately 22.4%, 8.1%, 6.93% and 6.55% of the Group's total revenue for the FY07. Nonetheless, in FY08, the group has only one single customer, which had contributed approximately 22.4% of the group's total revenue. Currently, the group has approximately 300 companies that source high-amperage electrical insulator from them. Revenue Contribution FYE May S-Team Switchgear Pte Ltd 2.4% 11.4% 22.4% Team Industrial Supplies 14.5% 12.4% 8.1% PT Siemens Indonesia 4.8% 11.2% 6.9% and C.M.R (Far East) Pte Ltd % 6.6% Total 21.7% 47.7% 43.9% Source: Prospectus INVESTMENT SWOT Strengths First and only Malaysian company to develop advanced thermoset polymer matrix fibre composites for applications in the high-amperage electrical insulator market in South East Asia. Providing customisation due to capabilities of end-to-end manufacturing Opportunities Leverage on customers' expansion plan. (Example: SMB Elecyric Singapore Pte Ltd and Sunlight electronic Singapore Pte Ltd have expanded their business in Malaysia in Vietnam). Electrical Insulator market is forecast to grow at a CAGR of 8.7%, 9.3%, 7.1% and 6.4% from year 2008 to Weaknesses Too dependent on certain sectors, such as electrical inductries Dependent on certain customer, namely S-Team Switchgear Pte Ltd. (If discontinue the service from Fibon, the group may lose some market share and consequently lower the group's profit, in our opinion). Threats Raw materials such as resin, additives and fibre represent a substantial portion of the Group's cost of sales. The resin price generally follows the price trend of crude oil. Fibon does not have long-term contract with customer for the provision of products and services. Due to the frequent changes in the costs of raw materials. Therefore the Group needs to consistently secure new orders from existing and new customer. CORPORATE STRATEGY For overseas expansion, the group plans to expand to Australia, United Arab Emirates and United Kingdom. It plans to spend RM1.18mn to set up three sales offices overseas in three years. The Group plans to establish new offices in Australia within the next few months, followed by United Arab Emirates and London. Meanwhile, the group also plans to penetrate into low and medium amperage markets as these markets still largely untapped and have higher sales volume potential. Fibon Berhad [ 5 ] New Listing

6 FINANCIAL HIGHLIGHTS The group has registered a commendable sales growth since FY06-FY08. The Group FY08 PBT increased 89.2% to RM7.8n on the back of 80.8% surge in revenue to RM14.3mn compared with FY07. The group attributed their commendable revenue growth to increased sales from existing customer and new customer from Malaysia, Singapore, Indonesia and Australia. In addition, the trading of copper also increased by more than hundred percent. The sales of copper accounted for 15.6% of their total revenue in FY08. For FY07-09 we expect the Group's earnings to achieve a compounded annual growth rate (CAGR) of 31% to reach RM9.5mn. Furthermore, we expect the group will enjoy a lower double digit revenue growth as we believe that a broad-based moderation of world economic growth due to the cooling of US economy will temporary slow down the demand for the group's products for REVENUE VS NET PROFIT RM 'm Revenue (LHS) Net Profit (RHS) F Source: Prospectus, TA Securities VALUATION At the IPO price, Fibon is trading at 8.8x FY09 PER, which is quite low compared to Mesdaq average PER of 15.07x. There is no listed local competitor that is directly comparable to Fibon. The closest international peer is Japan listed Hitachi Chemical with market capitalisation of RM73mn. The stock is currently priced at a PER of 6.8x. We have fairly valued Fibon at RM0.68 (ex-bonus issue) and RM2.20 (cum-bonus issue), pegged to a forward PER of 7.0x. This represents a 10% discount against Hitachi Chemical's FY09 PER of 7.8x. We believe that the discount is justifiable in view of the group's smaller operation and regional market centric characteristic of the group. We believe the offer price of RM2.73 has already fully reflected its value. In addition, we believe the share price appreciation potential is now limited due to lowers trading activities and difficulty in attracting investor attention. Do not subscribe. DISCLAIMER The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein. for TA SECURITIES HOLDINGS BERHAD Yaw Chun Soon, Executive Director - Operations TA Securities Holdings Berhad (14948-M) (A Participating Organisation of Bursa Malaysia Securities Berhad) Menara TA One, 22 Jalan P Ramlee, Kuala Lumpur. Malaysia Tel : Fax : Fibon Berhad [ 6 ] New Listing