PGF: Cost Efficiencies Drive Quarterly Gains, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An investment bank has reiterated a positive outlook, maintaining a “BUY” recommendation for the company, citing its strategic growth initiatives and a recent uplift in quarterly performance driven by effective cost management. The target price has been set at RM0.25, representing a 25.0% upside from the last traded price of RM0.20.
Performance Review
For the nine months ended FY26 (9MFY26), the company’s core profit of RM22.5 million largely met both the investment bank’s and consensus estimates, accounting for 88% of projections. This performance is considered within expectations, acknowledging the typical seasonal slowdown in sales during the fourth quarter due to year-end festive periods affecting shipments.
Despite a 7.3% year-on-year increase in revenue for 9MFY26, core profit saw a 3.0% decline compared to the previous year. This was primarily attributed to a 2-percentage point contraction in EBITDA and core profit margins, stemming from increased staff costs and adverse foreign exchange movements.
However, the third quarter of FY26 (3QFY26) demonstrated a significant quarter-on-quarter improvement, with core profit rising by 30.9% to RM7.8 million. This positive shift was driven by a reduction in staff costs, following increased payments for performance bonuses in the prior quarter (2QFY26). The benefits of these cost efficiencies more than offset the cost pressures arising from a weakening Australian Dollar.
Strategic Outlook and Expansion
Looking ahead, the company is progressing with its strategic expansion plans. The construction of a new manufacturing plant in Kulim East is on schedule for completion by 1QFY27, with machinery expected to arrive by 4QFY26 to commence trial production. This expansion is poised to significantly increase the company’s capacity in FY27, from 30,000 metric tonnes to 65,000 metric tonnes. However, the utilisation rate is projected to soften, dropping to 62% from 92% in FY26, as the expanded capacity comes online.
On the property development front, a joint venture company (Nexel Group, 50.1% owned) is set to resubmit its full development plan after receiving positive feedback from a recent meeting regarding water supply issues. Authority approval for this plan is anticipated by the end of March or early April.
Investment Conclusion
The investment bank maintains its “BUY” recommendation, reflecting confidence in the company’s long-term growth trajectory driven by capacity expansion and the progression of its property development ventures. The target price of RM0.25 reflects an expected 25.0% return, reinforcing the positive outlook despite short-term margin pressures and anticipated softer utilisation post-expansion.
