KUALA LUMPUR (June 27): Hong Leong Investment Bank (HLIB) Research has valued Coraza Integrated Technology Bhd at 76 sen and said it believes Coraza will witness a multi-year growth from: i) Malaysia’s strong engineering supporting industries (ESI); ii) strategic portfolio exposures to the semiconductor, instrumentation, life science and medical devices and aerospace industries; and iii) a better product mix from major customers’ high-margin products.

In a note on Monday (June 27), the research house said with Coraza’s existing factory running at 80-90% capacity utilisation, 66.5% of the proceeds from IPO will be utilised to debottleneck its fabrication process via constructing a new double-storey factory to accommodate new state-of-art machinery to capture the future strong demand.

HLIB said this new factory will be constructed in three phases with full effect expected to kick in by December 2023, which will double the group’s built-up area while adding about 25% of the group sheet metal fabrication capacity.

“Overall, the expansion plan is expected to improve Coraza’s margin as previously outsourced jobs will now be fully completed in-house.

“This will also showcase Coraza’s capabilities to undertake more complex, high precision and high mix manufacturing in meeting stringent quality standards to attract potential and new iindustry clients

“Moreover, the new factory with additional 25% sheet metal fabrication capacity in FY24 should lift Coraza’s earnings to register a 22% CAGR for FY21-24 core PATAMI. We value Coraza at 76 sen, ascribing 18 times P/E on FY23 EPS of 4.2 sen (26.7% upside),” it said.