Ecomate springs a good upward jump, spurred by M&A talks

Johor-based ready-to-assemble (RTA) home furniture specialist Ecomate Holdings Bhd reached its 52-week high of 90 sen in May. In the past year, it has gained 20.1% to close at 86 sen on Aug 30. The rise in share price could be supported by a relatively strong fundamental and growth prospects.

Ecomate is currently trading at a Price / Book multiple of 7.3x based on its book value per share of 12 sen as at end-May 2024. To cater for rising demand of ready-to-assemble furniture products, Ecomate will be commencing construction of Factory C by end-2024. This is expected to increase its combined annual manufacturing capacity by 50% to about 712,800 units from 475,200 units currently.

Ecomate, which migrated from the ACE Market to the Main Market, is now eyeing merger and acquisition (M&A) opportunities, to expedite growth. It is on the lookout to acquire assets or businesses that are related to the furniture industry.

Ecomate could be going upstream by acquiring a chipboard company as chipboard and medium-density fibreboard (MDF) are its main raw materials. About 56% of Ecomate’s fibreboard is sourced from Mieco Chipboard Bhd, a Main Market-listed particleboard company

Mieco has a total annual production capacity of more than one million cubic metres from multiple manufacturing plants across Pahang and Negeri Sembilan. Besides chipboard companies, Ecomate might be looking to acquire some of its smaller competitors in the RTA segment.

Based in Muar — the “Furniture City of Malaysia” — Ecomate has launched more than 1,000 home furniture designs for the living room and bedroom categories. Other furniture items in its portfolio include bar and wine cabinets, dining tables and kitchen cabinets.

However, its financial results do not look so promising. Its net profit plunged to RM315,000 in the first quarter ended May 31, 2024 from RM1 million a year ago, mainly due to higher operating costs and increase in exhibition related cost. This was despite posting a marginally higher revenue of RM12.9 million in 1Q24 versus RM11.9 million a year ago.

Investors appear to have the appetite to continue buying into Ecomate’s growth story although it will take some time to come to realisation.