PETALING JAYA: TA Research says Zantat Holdings Bhd is poised to benefit from robust demand across diverse industrial sectors for calcium carbonate (CC) based products, which will support its objective of moving up the value chain to improve its profit margin.
The ACE Market-bound company is a leading premium CC powder and CC dispersions product maker in Malaysia and earns two thirds of its income from overseas markets such as India, Egypt, Taiwan and Vietnam.
Its exports to India could see growth as the country’s supply of the same products has been impacted by the tensions in the Red Sea. Zantat is also set to introduce new bioplastic compounding products this year.
“Going forward, we estimate that Zantat’s core net profit will register a growth of 29%, 10.4% and 21.6% to RM7mil, RM7.7mil and RM9.4mil respectively for financial year 2023 (FY23) to FY25, respectively.
“This is in tandem with revenue growth as a result of higher production capacity, amidst the stabilising freight costs and input expenses,” the research house stated in its report on Zantat.
Zantat recorded revenue of RM113mil and earnings of 5.4mil in FY22 and is forecast to generate income of RM122.1mil and net profit of RM7mil for FY23.
Zantat’s initial public offering aims to raise RM14mil, with the bulk of the proceeds earmarked for upgrading of existing facilities and repayment of bank borrowings.
The listing exercise will entail a public issue of 56 million new ordinary shares and an offer for sale of 16.8 million existing shares. The new shares will account for 26% of the group’s enlarged issued share capital.
The shares are offered at 25 sen a piece which is priced at a trailing price-earnings (PE) multiple of 12.9 times FY22 core earnings per share (EPS) of 1.9 sen.
TA Research has put a fair value of 31 sen a share on Zantat based on a target PE of nine times calendar year 2025 EPS of 3.4 sen.
The research house noted the valuation was made after considering the group’s projected robust EPS growth in the next two years and its strategic advantage of leveraging abundant limestone reserves amid stabilising raw material costs.
The listing exercise will also see Zantat’s balance sheet improve from a net debt position of RM3.5mil, with a net gearing level of 0.05 times, to a net cash position of RM9.2mil.
“Zantat currently does not have a formal dividend policy. We anticipate the company will declare a dividend payout of 15% of its net profit for FY24 and FY25, in view of its resilient financial performance and steady business expansion,” the research house added.
Zantat’s CC based production capacity is located in Perak. The company was established 38 years ago. It is scheduled to list on Bursa Malaysia Securities on March 27.