Company Background. Techbond Group (Techbond) is a leading specialist in the development and manufacture of industrial adhesives & sealants in Malaysia. The group’s key products include water-based/hot melt adhesives, as well as water/solvent-based sealants. These products are widely used in various sectors such as woodworking, paper & packaging, automotive, building & construction, personal care and mattresses. Since 2005, Techbond has also established a strong presence in Vietnam and exports to over 30 countries across Asia, Europe and Africa.

Prospects. (i) Focusing on research & development (R&D) and its 8 trademarked in-house brands, the group provides tailored products and fosters customer loyalty with a competitive edge. Through active participation in exhibitions, Techbond has entered new markets, acquired customers, and is discussing further expansion, (ii) With the woodworking industry recovering, the group's upstream polymerisation factory in Vietnam, which produces polymers for both in-house adhesive and external supply, is expected to continue growing, and (iii) Remains upbeat about the synergistic acquisition of Malayan Adhesives and Chemicals, a specialist in adhesives and chemicals, which enables the group to broaden product range and explore new segments.

Financial Performance. In 9MFY24, Techbond reported higher revenue of RM112.6mil (+50% YoY) with a PAT of RM11.4mil (+99.7% YoY). This was mainly driven by healthy order flows across markets, continued recovery of key industries and contributions from the group’s subsidiary - Malayan Adhesives and Chemicals.

Valuation. Techbond is currently trading at an attractive FY25F P/E of 12.5x, which is lower than Bursa Industrial Production Index’s 18.3x. As a comparison, US-based H.B. Fuller Co., which manufactures/distributes adhesives, sealants, coatings and other specialty chemical products worldwide, trades at a higher FY25F P/E of 16x.

Technical Analysis. Techbond may trend higher after it broke above the key RM0.48 resistance and hit a new 52-week high 2 weeks ago. In view of the uncovered upside gap formed on 18 June with rising EMAs, the upward momentum is likely to pick up further. A bullish bias may emerge above the RM0.52 level with stop-loss set at RM0.47, below the 20-day EMA. Towards the upside, nearterm resistance level is seen at RM0.65, followed by RM0.70.

Source: AmInvest Research - 1 Jul 2024