KUALA LUMPUR: Public Investment Bank (PublicInvest) research has attached a 28 per cent premium to food ingredients and additives supplier Agricore CS Holdings Bhd, giving it a fair value of 64 sen.
The company will debut on the ACE Market of Bursa Malaysia on June 21, 2024, at an initial public offering (IPO) price of 50 sen.
The research house has derived the fair value based on a 14 times price-to-earnings (PE) ratio to the projected earnings per share (EPS) of 4.6 sen for the financial year 2025 (FY25), which is near Bursa Consumer Index's PE multiple of around 15 times.
"We are forecasting earnings to grow at a two-year compounded annual growth rate (CAGR) of 17.1 per cent, supported by a resilient demand from the food and beverage (F&B) manufacturing and processing industry as well as food service industry," it said in a research note today.
According to PublicInvest, Agricore's growth will be driven by higher inventory levels, and setup of a regional storage facility.
The regional storage facility in Klang will expand its storage capacity, with a built-up area of 30,000 square feet, to address the high utilisation rates at Bukit Minyak Premises and improve logistics efficiency.
"This expansion aims to enhance product delivery to central and southern Peninsular Malaysia, save approximately RM700,000 in logistics costs annually, and support future business growth. The new facility is set to start operations in October 2024 and will allow for increased inventory levels and better service to customers in the region," it added.
PublicInvest said the company's plan to expand its sourcing and distribution segment by increasing inventory levels to meet customer demand and drive revenue growth will enable it to a more timely delivery at larger quantity, ensuring consistent product availability and prompt order fulfillment.
"This strategy also allows the group to manage supply fluctuations during non-harvest seasons and gain a competitive advantage during favourable market conditions by offering better pricing," it said.
The firm added that the company's competitive strengths include compliance with internationally recognised food quality and safety standards, sustainable business in strengthening food security, in-depth knowledge and experience in the food ingredients industry and food technology, a wide variety of products for a wide range of customers, and experienced management team.