Seng Fong Holdings Berhad (SFHB) is principally involved in the processing of cup lumps into block rubber. The group also trades block rubbers directly, which are sourced from international rubber traders and/or natural rubber processors (Trading Segment). Block rubbers produced are sold directly to end-user customers, the majority of them are tyre manufacturers and also international rubber traders.
IPO Statistic
The IPO entails a public issue of 90,814,700 new ordinary shares and an offer for the sale of 70,059,600 shares at an IPO price of RM0.75/share.
Public issue:
25,948,000 new shares for application by the Malaysian public;
16,250,000 new shares for application by eligible parties;
64,870,000 new shares for private placement to Bumiputra investors
approved by MITI; and
53,806,300 new shares by way of a private placement to selected
investors.
Main Competitive Advantages
- Proven track record in the rubber processing industry and able to pass on the increase in cost to customers; and
- Experienced management team.
Valuation
Based on its IPO price of RM0.75, SFHB is valued at 10.4x and 9.9x CY22 and CY23 PER, respectively. There are no direct listed comparable peers in Malaysia, thus we benchmark SHFB with its regional peers. Pegging a PE multiple of 11.6x CY23 EPS, representing a 20% discount to its regional peers’ market cap weighted average PER of 14.6x for its relatively small market cap, we fairly value SFHB at RM0.88.
Business Overview
Seng Fong Holdings Berhad (SFHB) is principally involved in the processing of cup lump into block rubber. The group sources the cup lump primarily from domestic and international rubber traders; and semi-processed rubber (e.g. Ribbed smoked sheet (RSS) and synthetic rubber) and value-added additives (e.g. other chemicals) mainly from international rubber traders, to produce Standard Malaysia Rubber (SMR) Grade and Premium Grade block rubber (Processing Segment)
The group also trades block rubbers directly, which are sourced from international rubber traders and/or natural rubber processors (Trading Segment). Block rubbers produced are sold directly to end-user customers, the majority of them are tyre manufacturers, and also international rubber traders. SFHB’s products are mainly sold to overseas customers. Export sales contributed to approximately 99.9% of the group’s revenue in FY19, FY20 and FY21 respectively, with China being the main export destination.
Valuation
Based on its IPO price of RM0.75, SFHB is valued at 10.4x and 9.9x CY22 and CY23 PER, respectively. There are no direct listed comparable peers in Malaysia, thus we benchmark SHFB with its regional peers. Pegging a PE multiple of 11.6x CY23 EPS, representing a 20% discount to its regional peers’ market cap weighted average PER of 14.6x (Figure 9) for its relatively small market cap, we fairly value SFHB at RM0.88
