CPE Technology Berhad will be making its debut on Bursa Main Market yesterday, the company specialises in precision-machined parts manufacturing and CNC (computer numerical control) machining services for a plethora of industries.
Rakuten peg CPE’s fair value at RM1.18/share based on FY24 PE of 25x, in line with its closest industry peer’s average forward PE. The house believes CPE is poised to benefit from positive industry prospects, as Malaysia’s ESI (engineering supporting industry) is expected to grow from RM9.98bn in 2023 to RM13.88bn in 2027 at a CAGR of 8.2%, according to Protégé, indicating a favourable demand environment for CPE.
However the stock debuted at the Main Market amid poor sentiment opening at 90 sen, compared with the initial public offering (IPO) price of RM1.07. It fell 17 sen or 15.89%.
At 9.35am, the price rose slightly to 0.955 which was still a -0.115 (-10.8%) shortfall of the initial IPO price with an opening volume of 6.31 million shares.
CPE achieved a 3-year GAGR of 30.9% from FY19 to FY23 predominantly from its long-term relationships with four
major customers. Additionally, CPE also offers precision machining services globally namely from Singapore, the USA, Japan, and Malaysia, spanning across various industries that include semiconductor, life sciences, medical devices, sports equipment, sensors, and security.
The house believes this diversification minimizes risks and enhances market resilience. CPE is set to drive growth via a new plant and has allocated RM69.6m from its IPO proceeds for its construction, marking a significant 245.32% expansion from 96,586 sq ft currently to 333,534 sq ft. The new plant is scheduled for completion by 2H25.
As part of its growth strategy, CPE intends to bolster its production capabilities through a RM32.9m investment in new machinery and equipment. Additionally, CPE has allocated RM7.0m to secure vital raw materials. As such, Rakuten expects a strong earnings growth averaging around 12% for FY24-FY26 driven by an unbilled order book of RM69.27m as of October 23, and the ongoing progression in end-user markets across the sub-industries it is involved.
CPE’s financial standing is solid currently in a net cash position and is anticipated to improve after the IPO. Meanwhile, CPE also offer a dividend yield of 1% with the target dividend payout ratio of 25%.
