PETALING JAYA: TA Securities Research has valued Main-Market bound MST Golf Bhd at RM1.20 a share, a 48.2% premium to its initial public offering (IPO) price of 81 sen a share.
The research house’s call was based on the golf equipment retailer’s strong profit growth, and its business plan to widen coverage in existing markets and penetrate regional markets amidst robust demand for golf clubs and related equipment.
“We value the group at RM1.20/share premised on price-earnings ratio (PER) of 22x FY2024F earnings per share (EPS) of 5.4 sen, in line with the local specialty store peer MR DIY.
“This is fairly justified by the stock’s strong earnings growth of 26.7%/31.8% (which outperform its peer’s consensus earnings growth of 21.5%/16.4%) in FY2023/FY2024 and dividend payout of 30%, albeit the stock has relatively smaller market capitalisation,” it said in a note today.
According to TA Securities, MST Golf saw a return on equity (ROE) of 40% in FY2022 versus MR DIY’s ROE of 36.6%.
Slated to be listed on July 20, MST Golf’s business is in specialty retail and wholesale of golf equipment such as golf clubs, golf apparels, and other accessories in Malaysia and Singapore.
Citing independent market research firm Vital Factor Consulting, TA Securities said the import value of golf equipment in Malaysia grew at a compound annual growth rate (CAGR) of 32.4% to RM132.1 million in 2022, while Singapore’s import value of golf equipment grew by 33.8% last year.
“Both region’s import growth was mainly attributed by the increase in golf demand, as golf is one of the singular based sports (where participants compete as individuals) played outdoors during the Covid-19 pandemic,” it said.
From FY2019 to FY2022, MST Golf’s revenue grew by a three-year CAGR of 19.6% to RM300.9 million while net profit rose 41.8% to RM29.1 million, mainly driven by the growing number of golf retail outlets, introduction of the ilovegolf membership programme, and strengthening of the US dollar which led to higher selling prices.
Its net profit margin also rose from 5.3% in FY2019 to 8.9% in FY2022, thanks to better cost efficiency after the deployment of digitalisation progress.
TA Securities forecast the group’s revenue and net profit to grow to RM386.6 million and RM36.9 million in FY2023, while revenue and net profit for FY2024 is estimated at RM471.3 million and RM48.6 million.
The IPO comprises a public issuance of 160 million new shares and an offer for sale of up to 68 million existing shares.
MST Golf expects to raise RM184.68 million from the IPO at 81 sen a share, of which RM129.6 million is from the issuance of new shares.