Discussing the valuation of Mega Fortris Berhad (MEGAFB, 5327)
After the recent listing of three main board companies, it is inevitable that the market's funds will be "divided", and one of the companies that has attracted a lot of investor attention is MEGAFB, which was listed at a PE valuation of 29.13 times (IPO price of RM0.670), of course, many investors also consider it expensive.
So, today we will focus on discussing the industry where MEGAFB is located - the security seals industry, the growth prospects of the company itself 📈, and finally talk about the valuation issue.
#Business Introduction
The so-called security seals are mainly used to 🛡️ protect items, and to see if the protected items have been opened without authorization during transportation, just like the cap of a soda bottle. Once opened, the plastic ring will definitely leave marks, 🤔 which is known as the "Tamper Evidence" term in this industry.
Generally speaking, security seals are also divided into 3 security levels, the highest level that requires a force of 10 kilonewtons ("kN") to open 🔝 , usually these security seals are mainly made of steel or alloy, mainly for protecting valuable items such as gold and firearms transportation.
What is the concept of 10 kN? Basically, it is like moving an object weighing 1,000 KG, so you could say that specific equipment is needed to open it, right?
Of course, there are also 'medium-level' security seals that require a minimum of 2.3 kN of force to open, usually used in the transportation sector 🚛, such as commonly seen in containers. These types of security seals are typically made of steel or high-strength plastics (such as POM), and the lowest level is plastic security seals (opened with less than 2.3 kN of force), like the plastic bags used when sending documents at the post office, which are also a form of security seal.
Here's another example of a plastic security seal: imagine a plastic padlock that can only be locked once 🔒. If you want to open it, there is only one way – forcibly opening it will cause the 'pin' inside the padlock to break, leaving clear evidence of tampering.
In summary, security seals are used for protection and to confirm whether an item has been tampered with without authorization 🔍. Although they are considered 'invisible' items in everyday life, they are crucial for the entire economy, especially in the transportation sector.
When it comes to 'security' and 'privacy,' the reputation and brand of a manufacturer are crucial ‼️. From personal knowledge, in the industry, MEGAFB ranks third, with the first and second places held by century-old brands TydenBrooks and Unisto. MEGAFB, established less than 30 years ago, is a very young but rapidly developing company.
In addition to designing and manufacturing, MEGAFB also engages in trading related transportation items, such as dunnage bags and polyester cords used to secure goods, providing customers with end-to-end services. The company also uses this business to explore new potential customer groups.
#FinancialPerformance
Between FYE2021 and FYE2024 (the company's fiscal year ends on 30 June), MEGAFB's revenue grew at a CAGR of 7.3% 📊, while its profit after tax (PAT) grew at a CAGR of 67.5%. The reason for the high growth rate was partly due to the impact of Covid-19 in FYE2021 😷. At that time, production materials such as plastics, steel, and transportation costs all soared, lowering the company's profit margin. Conversely, by FYE2024, costs began to stabilize, and profits naturally increased.
For reference, in FYE2021, the company had a PAT margin of only 3.4%, which increased significantly to 13.0% by FYE2024 🎉. However, there is still room for optimizing production capacity. For FYE2024, the company can produce approximately 550.7 million security seals per year (excluding lower security-rated plastic bag seals), with a production capacity utilization rate of 81%. As for the plastic bag seals mentioned earlier, the production capacity utilization rate is around 45%.
#Purpose of fundraising and development plan
Through this IPO, MEGAFB is expected to raise RM99.07 million in funds 💰, with only a small portion of 11.20% used for listing expenses, and the rest is for the company's future development.
Next, MEGAFB will establish a new factory in 🌍 UK to serve customers in Europe (accounting for approximately 30.0% of the company's revenue). The new factory is expected to have 7 automated production lines with an annual production capacity of 200.0 million secure seals.
Earlier, we mentioned that transportation costs have impacted the company's expenses 📉. Following this, it is expected that the UK factory, once operational, will reduce the company's transportation costs to the European market, as well as the impact of exchange rates. However, this factory is expected to be completed in 2027 Q3.
In addition, there is also optimism about another development for MEGAFB in the gambling sector. 🎲
Currently, the gambling sector accounts for approximately 6.3% of the company's revenue in FYE2024. The company is currently serving 39 clients, with these client groups located in areas such as Cambodia, the Philippines, and Macau. Readers may wonder what exactly MEGAFB offers in these casinos. 🤔
Regular visitors to Genting Highlands may have seen 🃏 playing cards that come in transparent boxes for protection. This is to prevent the cards inside from being marked or manipulated by other means. Hence, the protective boxes for these new cards and safety seals (single-use, destroyed upon opening) fall under secure seals.
Next, MEGAFB will collaborate with VS (yes, you read that right, the VS in Macau 😂) to produce cards from scratch, followed by MEGAFB being responsible for testing, placing them in secure seals, using software to track the entire journey of the cards from 'birth' to the casino, and then overseeing the final card destruction.
This means that MEGAFB can increase its market share in the industry in the future, also has great revenue development potential, but the card production line in the Malaysian factory is scheduled to start production in 2026 Q2 😅 while the production line in Macau will start in 2027 Q3.
In addition, the company will upgrade the 6 production lines in the current Malaysian factory to automated production lines, which will help improve the company's production efficiency and reduce production costs.
#Conclusion
Undoubtedly, MEGAFB's current valuation already reflects the future development of 1-2 years, and indeed a valuation of 29.13 times is not cheap 🤔 However, the moderator has also learned that institutional investors are interested in this company, and the company is also considered a leader in the industry, so from a fundamental perspective, there is still some potential in this company (if you need to consider the stock price, it is inconvenient to speculate).
So, with so many IPO temptations, will readers subscribe to MEGAFB?
----- I am the dividing line ------
Disclaimer:
As the moderator is not a licensed stock analyst, we will not provide you with any buying or selling advice. If needed, you can consult a licensed stock analyst or broker.
The moderator's current identity is the Marketing Representative for iFast Capital Sdn. Bhd., TA Securities Holdings Berhad, and moomoo Securities Malaysia Sdn. Bhd., and also an independent financial content writer, not providing financial advisory services.
When writing this article or in the short term (within 3 months), the moderator is interested in investing or already holds the above-mentioned companies, unless new factors arise, therefore, readers must check the independence of this content.
Finally, all the shared content is information, news, and content obtained by the individual moderator through various sources. All the mentioned content in the article is only for reference, learning, education, and informational purposes, and not professional financial, investment, or trading advice. If you want to get trading advice, please consult professional stock analysts or investment banks and determine their risks and potential returns on your own. Once again, 12Invest is not responsible for the accuracy, completeness, correctness, or expiry of any shared content or opinions. Any decision made by the reader after reading the article is their own responsibility. Remember, all investments carry risks, so take measures to protect yourself.
#12INVEST
#BURSA
#IPO
#MEGAFB
So, today we will focus on discussing the industry where MEGAFB is located - the security seals industry, the growth prospects of the company itself 📈, and finally talk about the valuation issue.
#Business Introduction
The so-called security seals are mainly used to 🛡️ protect items, and to see if the protected items have been opened without authorization during transportation, just like the cap of a soda bottle. Once opened, the plastic ring will definitely leave marks, 🤔 which is known as the "Tamper Evidence" term in this industry.
Generally speaking, security seals are also divided into 3 security levels, the highest level that requires a force of 10 kilonewtons ("kN") to open 🔝 , usually these security seals are mainly made of steel or alloy, mainly for protecting valuable items such as gold and firearms transportation.
What is the concept of 10 kN? Basically, it is like moving an object weighing 1,000 KG, so you could say that specific equipment is needed to open it, right?
Of course, there are also 'medium-level' security seals that require a minimum of 2.3 kN of force to open, usually used in the transportation sector 🚛, such as commonly seen in containers. These types of security seals are typically made of steel or high-strength plastics (such as POM), and the lowest level is plastic security seals (opened with less than 2.3 kN of force), like the plastic bags used when sending documents at the post office, which are also a form of security seal.
Here's another example of a plastic security seal: imagine a plastic padlock that can only be locked once 🔒. If you want to open it, there is only one way – forcibly opening it will cause the 'pin' inside the padlock to break, leaving clear evidence of tampering.
In summary, security seals are used for protection and to confirm whether an item has been tampered with without authorization 🔍. Although they are considered 'invisible' items in everyday life, they are crucial for the entire economy, especially in the transportation sector.
When it comes to 'security' and 'privacy,' the reputation and brand of a manufacturer are crucial ‼️. From personal knowledge, in the industry, MEGAFB ranks third, with the first and second places held by century-old brands TydenBrooks and Unisto. MEGAFB, established less than 30 years ago, is a very young but rapidly developing company.
In addition to designing and manufacturing, MEGAFB also engages in trading related transportation items, such as dunnage bags and polyester cords used to secure goods, providing customers with end-to-end services. The company also uses this business to explore new potential customer groups.
#FinancialPerformance
Between FYE2021 and FYE2024 (the company's fiscal year ends on 30 June), MEGAFB's revenue grew at a CAGR of 7.3% 📊, while its profit after tax (PAT) grew at a CAGR of 67.5%. The reason for the high growth rate was partly due to the impact of Covid-19 in FYE2021 😷. At that time, production materials such as plastics, steel, and transportation costs all soared, lowering the company's profit margin. Conversely, by FYE2024, costs began to stabilize, and profits naturally increased.
For reference, in FYE2021, the company had a PAT margin of only 3.4%, which increased significantly to 13.0% by FYE2024 🎉. However, there is still room for optimizing production capacity. For FYE2024, the company can produce approximately 550.7 million security seals per year (excluding lower security-rated plastic bag seals), with a production capacity utilization rate of 81%. As for the plastic bag seals mentioned earlier, the production capacity utilization rate is around 45%.
#Purpose of fundraising and development plan
Through this IPO, MEGAFB is expected to raise RM99.07 million in funds 💰, with only a small portion of 11.20% used for listing expenses, and the rest is for the company's future development.
Next, MEGAFB will establish a new factory in 🌍 UK to serve customers in Europe (accounting for approximately 30.0% of the company's revenue). The new factory is expected to have 7 automated production lines with an annual production capacity of 200.0 million secure seals.
Earlier, we mentioned that transportation costs have impacted the company's expenses 📉. Following this, it is expected that the UK factory, once operational, will reduce the company's transportation costs to the European market, as well as the impact of exchange rates. However, this factory is expected to be completed in 2027 Q3.
In addition, there is also optimism about another development for MEGAFB in the gambling sector. 🎲
Currently, the gambling sector accounts for approximately 6.3% of the company's revenue in FYE2024. The company is currently serving 39 clients, with these client groups located in areas such as Cambodia, the Philippines, and Macau. Readers may wonder what exactly MEGAFB offers in these casinos. 🤔
Regular visitors to Genting Highlands may have seen 🃏 playing cards that come in transparent boxes for protection. This is to prevent the cards inside from being marked or manipulated by other means. Hence, the protective boxes for these new cards and safety seals (single-use, destroyed upon opening) fall under secure seals.
Next, MEGAFB will collaborate with VS (yes, you read that right, the VS in Macau 😂) to produce cards from scratch, followed by MEGAFB being responsible for testing, placing them in secure seals, using software to track the entire journey of the cards from 'birth' to the casino, and then overseeing the final card destruction.
This means that MEGAFB can increase its market share in the industry in the future, also has great revenue development potential, but the card production line in the Malaysian factory is scheduled to start production in 2026 Q2 😅 while the production line in Macau will start in 2027 Q3.
In addition, the company will upgrade the 6 production lines in the current Malaysian factory to automated production lines, which will help improve the company's production efficiency and reduce production costs.
#Conclusion
Undoubtedly, MEGAFB's current valuation already reflects the future development of 1-2 years, and indeed a valuation of 29.13 times is not cheap 🤔 However, the moderator has also learned that institutional investors are interested in this company, and the company is also considered a leader in the industry, so from a fundamental perspective, there is still some potential in this company (if you need to consider the stock price, it is inconvenient to speculate).
So, with so many IPO temptations, will readers subscribe to MEGAFB?
----- I am the dividing line ------
Disclaimer:
As the moderator is not a licensed stock analyst, we will not provide you with any buying or selling advice. If needed, you can consult a licensed stock analyst or broker.
The moderator's current identity is the Marketing Representative for iFast Capital Sdn. Bhd., TA Securities Holdings Berhad, and moomoo Securities Malaysia Sdn. Bhd., and also an independent financial content writer, not providing financial advisory services.
When writing this article or in the short term (within 3 months), the moderator is interested in investing or already holds the above-mentioned companies, unless new factors arise, therefore, readers must check the independence of this content.
Finally, all the shared content is information, news, and content obtained by the individual moderator through various sources. All the mentioned content in the article is only for reference, learning, education, and informational purposes, and not professional financial, investment, or trading advice. If you want to get trading advice, please consult professional stock analysts or investment banks and determine their risks and potential returns on your own. Once again, 12Invest is not responsible for the accuracy, completeness, correctness, or expiry of any shared content or opinions. Any decision made by the reader after reading the article is their own responsibility. Remember, all investments carry risks, so take measures to protect yourself.
#12INVEST
#BURSA
#IPO
#MEGAFB
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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alleo 两朵花 : thanks for sharing. I will try my luck to subscribe![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Tan Kyzen (Max) OP alleo 两朵花 : No buy or sell recommendation
Cuhai88 : There is no explosive power, and there is a lot of uncertainty in the future, so I will not get involved in this stock.