Future Plans for Growth:

  • Construct an additional operating facility.

The group plans to construct an additional operating facility, with an allocation of RM7.8m (26.0% of IPO proceeds). At least 4 fully automated anodising lines will be installed to capture opportunities in the semiconductor and E&E industries, and at least 4 semi-automated metal plating lines to serve both our existing and new customers. A parcel of vacant industrial land with at least 3.00 acres will be acquired to construct the operating facility (built-up area of at least 100,000 sq ft)

  • Expand service offerings.

The group intends to expand service offerings by offering cleaning and packaging services in a cleanroom environment. This will enable the Group to attract a new customer base and offer additional services to its existing customers who require such specialised environments, without having them to send to third party providers.

  • Adopt new automation technologies.

On top of that, the group plans to adopt new automation technologies in order to enhance the precision in its surface finishing treatment processes and offer high throughput. To achieve that, the group intends to acquire the masking and dispensing robotic arms to automate pre-production non-metal plating processes. RM1.0m (3.3% of IPO proceeds) will be allocated to adopt the technology.

  • R&D department will be established.

A research and development (R&D) department will also be established, consisting of 3 engineers and a fully-equipped R&D laboratory, operational by second quarter 2025. The group will be allocating RM0.5m (1.7% of IPO proceeds) to fund the initiative.

M+ Fair Value

We assign a fair value of RM0.40 per share for Chemlite Innovation Berhad, representing a 60.0% upside from the IPO price of RM0.25. This valuation is based on a P/E ratio of 16.0x, pegged to FY27f EPS of 2.48 sen. We used FY27f EPS as the valuation anchor because the company’s growth potential will only be fully realised in FYE27 upon the commencement of its new manufacturing facility, a significant increase from its current facility setup.

 

Meanwhile, we believed that the ascribed P/E of 16x is fair, even though the average 12-month forward P/E and historical P/E among its peers stood at 9.4-12.4x, as the company enjoys a superior double-digit ROE and NP margin as compared to its peers, which have a negative average ROE and a marginal NP margin. Nevertheless, it is important to note that surface finishing treatments such as plating and anodizing are not the major revenue contributors for its peers. This distinction underscores CLITE’s niche position in the industry.