ASM Automation valued at 21 sen, 24pct above IPO ahead of July 2 debut
The firm said the valuation is based on a forward price-to-earnings ratio of 15 times, applied to the automation machinery solutions provider's projected mid-point earnings per share of 1.38 sen for the financial year 2026.
"We believe the discount is justified given ASM's smaller market capitalisation, coupled with its single-digit top line growth," the brokerage said in a research report released Tuesday.
ASM is scheduled to debut on Bursa Malaysia's ACE Market on July 2. The IPO, which opened for application on May 29 until June 19, is expected to raise RM21.8 million.
The bulk of the proceeds will fund business expansion, with 52.2 per cent earmarked for land and factory construction, 10.5 per cent for demonstration machinery and 9.2 per cent for design and development.
The remainder will be used for working capital and listing expenses.
According to Malacca Securities, ASM holds just a one per cent share of the automation machinery solutions market, but its ability to offer end-to-end automation for food and beverage (F&B) manufacturers is seen as a key strength.
"This is reflected in its notable average customer base of 220 as per Financial Years Under Review, including prominent clients like Adabi Consumer Industries Sdn Bhd and Malayan Flour Mills.
"ASM's D&D capabilities have also long been hidden gems that F&B manufacturers have yet to recognise," the firm said.
Unlike many of ASM's competitors that only supply machinery, the firm said ASM is able to customise its solutions to meet a wide range of manufacturing needs and industry applications.
ASM's market versatility is also evident in its involvement beyond F&B, including sectors such as poultry and currency note sorting, which enhances its growth potential.
"Given this flexibility, clients are able to utilise more of their manufacturing space, leading to better factory space utilisation and enabling better economies of scale — a win-win situation.
"Aligned with government initiatives to shift Malaysia towards a digital economy, ASM intends to enhance its internet of things solutions and robotics technology through its in-house engineering and development with approximately RM2.0 million," the firm added.
For the financial year 2024, ASM posted a net profit of RM7.1 million and revenue of RM39.13 million, with a healthy balance sheet.
Despite a modest 1.5 per cent earnings compound annual growth rate over three years, ASM is viewed as having stable prospects, underpinned by customised solutions, a stronger capital base and alignment with Malaysia's automation agenda.
However, key risks include project delays, supply chain disruptions, talent retention issues, and geopolitical or regulatory uncertainties.
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