Pan Merchant IPO: Valuation Justifies the Hype?

Malaysian industrial filter manufacturer Pan Merchant Bhd is set for its ACE Market debut on June 26 at 27 sen/share, valuing it at RM247M (32x trailing P/E). This IPO has sparked diverging analyst views on its valuation premium.

1. Business: Produces solid-liquid filtration products (edible oil, wastewater, food processing).

2. Key Strength: ~90% revenue from edible oil clients in 2024; >80% products exported globally.

3. IPO Funds Usage (RM62.69M): ~45% for manufacturing capacity expansion; rest for product development, European expansion (Netherlands), working capital & listing expenses.

1. Malacca Securities (Bullish): FV 33 sen (22% premium), based on 25x fwd P/E. Cites lower production costs vs. European peers, projects 17% net profit CAGR (FY24-27) driven by market penetration & diversification (sustainable fuels, water, mining).

2. Other Houses (More Cautious): Compare to international filter peers trading at 15-18x fwd P/E, questioning if cost advantage & export exposure offset scale/concentration.

While a 32x trailing P/E seems stretched, Pan Merchant offers:

1. Global market access.

2. Scalable production.

3. Clear expansion roadmap.

This is a classic growth potential vs. valuation discipline scenario. The premium may hold if execution (especially diversification) is strong. Short-term risks include earnings concentration & geopolitical factors.

Long-term investors eyeing growth-stage industrial exporters might find it compelling, but expect post-listing volatility.

Will Pan Merchant filter its way to success? #BursaMalaysia #IPO #ACEMarket #PanMerchant #Investing #Valuation #ManufacturingMY #GrowthStory