Malacca Securities Sdn Bhd has projected a three-year earnings compound annual growth rate (CAGR) of 16.7% for Mega Fortris Bhd as the security seals manufacturer and distributor gears up for its IPO with expected listing on the ACE Market on Nov 11. The house assigns a fair value of 85 sen per share for Mega Fortris, indicating a 26.9% upside from the IPO price of 67 sen. This valuation is based on an EV/EBITDA ratio of 14 times.
The 16.7% CAGR is supported by several factors, including the global trade expansion driven by e-commerce, the company’s strategic plans to establish a new factory in the UK and its upcoming business venture in Macao.
Mega Fortris, which has been in operation since 1995, has established a strong market presence and is reported to have the highest revenue in the Malaysian security seals sector, achieving RM166.7 million, according to the Vital Factor Consulting IMR report.
The company’s expansion into the UK aims to enhance production and delivery capabilities across Europe, regaining momentum lost during the pandemic. The new facility is projected to have an annual production capacity of approximately 200 million security seals.
In addition to its European expansion, Mega Fortris is significantly increasing its footprint in the gaming industry through a new venture in Macao. This initiative includes a comprehensive end-to-end solution for casino playing cards, which encompasses manufacturing, pre-shuffling and secure delivery.
The company has established partnerships with 39 casino operators in the region and anticipates that this venture will boost its revenue share from the gaming sector, which currently accounts for only 6.3% of total revenue.
As the global demand for tamper-evident solutions rises, Mega Fortris is well-positioned to capitalise on this trend. The global security seals market is forecasted to grow from US$1.2 billion in 2023 to US$2.24 billion by 2030, reflecting a CAGR of 9.3%. This growth is largely driven by tightening regulatory requirements and increasing adoption of tamper-evident packaging solutions across various industries.
With a market capitalisation of RM566.1 million and a share issue of 147.9 million, Mega Fortris is poised to leverage its extensive experience and innovative solutions to further strengthen its market position.
