IPO introduction: Following the growth of the food processing industry, EPB Group's reasonable price can reach 77 cents

EPB Group, a food and packaging solutions provider that plans to go public on August 23, is highly anticipated that it can continue to expand with the growth of the food processing and packaging machinery industry after listing, and receive a reasonable price of up to 77 cents from brokerage firms.

This reasonable price is equivalent to the initial stock price of 56 cents, which is 37.50% higher.

In introducing this upcoming IPO, Da Securities believes that this one-stop food industry and packaging machinery solutions provider has competitive advantages, including providing one-stop solutions for food processing and packaging machinery, having an experienced management team, and meeting internationally recognized quality standards.

APEX Securities is optimistic about EPB Group and believes that as demand in the frozen food market continues to grow, the company's expansion plans to improve production capacity, the integration of robotics technology and software development, and its firm foothold in the regional market, it will drive its future growth.

Looking ahead, EPB Group plans to expand its business scope in Penang and build a 0.07 million square foot plant, including offices, factories, warehouses and showrooms.

Analysts pointed out that the company will centralize operations at the plant to increase production capacity and enhance the customer experience.

Furthermore, EPB Group plans to adapt to the trend of Industrial Revolution 4.0 and enhance robotics capabilities to meet hygiene requirements and solve labor shortages.

Regarding the regional market, MERCURY Securities analysts pointed out that EPB Group has a strategic influence in high-growth markets such as the Philippines and Indonesia. Not only is the local population large, but economic growth and consumer spending are also growing rapidly.

“The governments of these countries are also prioritizing the food processing industry, which is a great time for EPB Group to expand.”

In addition, the company also sells products to the US, Myanmar, and Algeria, accounting for 7 to 10% of sales.

FY2023 turnover reached 85.1 million

Looking back at FY2023, about 70% of EPB Group's sales came from overseas, reaching RM85.1 million, which is more than double that of RM35.7 million in FY2020.

Also, analysts said that the company's balance sheet is stable, has a net cash position, and holds RM31.1 million in cash.

This will help support its post-listing dividend policy, and EPB Group intends to distribute dividends of up to 25% of net profit.

According to independent market research firm Protege, the Malaysian food processing and packaging industry is expected to have a compound annual growth rate (CAGR) of 10.4% between 2024 and 2028.

“This growth is supported by increased demand for ready-to-process foods, the adoption of automated machinery, and government support for developing local food-related industries.”

Looking ahead, Dax Securities expects the company's sales growth rates to reach 10%, 12.0%, and 15.0% in the 2024-2026 fiscal year, thanks to the growing market size of the food processing and packaging machinery industry.

While demand for food manufacturing and processing machinery increases, and in addition to cost optimization strategies, analysts expect net profit growth of 15.3%, 24.9%, and 18.5% for the next three fiscal years, respectively.

Considering the small market value of the company, Dacheng Securities gave a target price of 77 cents, which means that the capital-to-profit ratio is valued at 14 times, which is slightly lower than the average of 18 times that of its peers.

APEX Securities and MERCURY Securities offered target prices of 66 cents and 75 cents, respectively.