KUALA LUMPUR: CEKD Bhd is likely to benefit from the rapid growth of e-commerce and the rising awareness and preference for environmentally friendly paper packaging.
TA Securities Holdings Bhd said CEKD's paper printing and packaging segments stand to take advantage of higher demand for packaging materials and environmentally friendly paper packaging materials, namely polystyrene.
The company's electrical and electronics segment is also expected to grow in tandem with the continued growth of Malaysia's electrical and electronics industry, which has been performing well amid the pandemic.
"All in all, growth from these industries is expected to augur well for the die-cutting tools manufacturing industry," said TA Securities.
It added the die-cutting tool manufacturing industry is estimated to comprise about 40 companies, including domestic and foreign players with operations in Malaysia.
Based on CEKD's financial year 2020 revenue of RM26.4 million against Malaysia's die-cutting tool manufacturing industry 2020 revenue of RM197.7 million, TA Securities said CEKD's market share is estimated at 13.4 per cent.
According to market research firm Protégé Associates, Malaysia's die-cutting tools manufacturing industry is projected to grow at a compound annual growth rate (CAGR) of 3.2 per cent from RM216.5 million in 2019 to RM261.0 million in 2025.
"Generally, the die-cutting tools manufacturing industry's growth trajectory is anticipated to mirror that of the global economy given that the industry's end-user markets such as paper and paper products, electrical and electronics, automotive, aerospace, telecommunications, construction, oil and gas are sensitive to economic cycles."
However, the onset of the Covid-19 pandemic, which led to a global economic slowdown in 2020, weakened consumer sentiment and unprecedented disruptions to operations and supply chains.
This saw Malaysia's die-cutting tools manufacturing industry contract 8.7 per cent year-on-year (YoY) to RM197.7 million.
However, in the near term, TA Securities projected global recovery coupled with progressive easing of Covid-19 related restrictions are expected to aid the recovery of the die-cutting tools manufacturing industry.
CEKD is expected to list on the ACE Market of Bursa Malaysia on September 30 and raise RM24.28mil from its initial public offering (IPO).
The proceeds will be utilised to fund expansion plans, including the purchase of a new manufacturing facility and machinery and an upgrade of computer systems, according to the company's prospectus.
From the total proceeds, the company will utilise RM8.8 million to acquire a factory for manufacturing unit Hotstar (M) Sdn Bhd, RM4.3 million for capital expenditure, RM4 million for repayment of borrowings, and the remainder will go towards marketing activities, working capital and listing expenses.
TA Securities said CEKD had planned to increase its export revenue with targeted opportunities in Southeast Asia, such as Vietnam and Thailand.
"To improve its presence in these countries, it will leverage its relationship with existing customers in these markets.
The group's key customer segments include the paper printing and packaging and electrical and electronics industries while also serving the automotive, plastic packaging, textile, and leather industries.