It is involved in the development, manufacturing and distribution of tyre retreading materials and tyre retreading operations, operating across the value chain.
Commanding c.22% market share for tyre retreading materials in Malaysia, the Group’s growth going forward will focus on i) increasing its export sales to overseas markets, ii) enhancing its product range through new offerings, value-adding and focus on premium products, and iii) improving efficiencies.
Streets are therefore valuing Eversafe Rubber with a fair value of RM0.40 pegged to a 10.0x PE multiple, based on FY17F EPS of 4.0sen.
The IPO is expected to raise approximately RM17.3m from the issuance of 48m new shares, with c.73% of its proceeds to be utilised for capacity expansion and enhancing automation of its operations.
Eversafe Rubber’s growth will focus on i) increasing its export sales to overseas markets, ii) enhancing its product range through new offerings, value-adding and focus on premium products, and iii) improving efficiencies. The Group has been able to grow its overseas revenue to contribute c.57.1% for 9MFY16 from c. 54.8% in FY15.
As one of the prominent manufacturers of tyre retreading materials in Malaysia, Eversafe Rubber is able to compete against its competitors in securing new customers as well as retaining existing ones, coupled with establishing a wide global outreach with exports to at least 23 countries for FY15 onwards. Its tyre retreading solutions with customisation capabilities furthermore creates value enhancements to reinforce its competitiveness in the market.
Its catalysts include i) increase in commercial vehicles in Malaysia, which is expected to generate higher demand for retreaded tyres, ii) continued growth in China and Brazil for rubber compounds, iii) higher rubber prices which can translate to higher ASP with effective management of costs.
Downside risks among others include (i) volatility in prices of raw materials, (ii) fluctuation in foreign exchange rates and (iii) competition from existing and new market entrants locally and overseas.
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