Valuation / Recommendation

We initiate coverage on PGF with a BUY call and a SOP-derived TP of RM2.43, implying a 40% potential upside. Our valuation translates to an undemanding FY27E forward P/E of 4.2x, a steep discount to the construction materials sector average of 10.1x. We believe PGF warrants for a re-rating, underpinned by (i) strong earning visibility backed by robust glass mineral wool demand, supported by positive regulatory tailwinds in Malaysia & Australia, alongside future contributions from its upcoming property development project; (ii) timely capacity expansion to capture incremental demand; and (iii) attractive asset play from its strategically located 1,311-acre landbank in Tanjong Malim, Perak.

Investment Highlights

Strong earnings visibility.

PGF is set to capitalize on robust recovery in construction sector in Malaysia and Australia, given glass mineral wool’s widespread application including infrastructure. PGF’s core insulation business stands to gain from stricter energy efficiency regulations in key markets namely, Australia (NCC 2022, NatHERS uplift to 7 stars for Class 1 buildings), New Zealand, and Malaysia (EECB 2023), which are driving demand for cost-effective insulation solutions like glass wool. With 80% of revenue derived from exports (mainly in AUD and NZD) and 97% of its cost base in MYR, PGF is a net beneficiary of stronger AUD or NZD currency. Despite some translational headwinds from a firmer MYR trend, resilient overseas demand and strong pricing power help to cushion earnings. To meet rising demand, PGF has set up 4 warehouses across Australia, 2 distributors in New Zealand and 5 trucks for last-mile delivery in Australia. Additionally, PGF is enhancing its revenue stream with a RM600m GDV mixed-use JV property project in KHTP (launch by early 2026) and an exclusive agreement with Centria to distribute sandwich panels for data centres, positioning it to tap into the high-growth data centre segment. That said, we forecast 24% – 63% revenue growth over FY26-27E.

Timely capacity expansion to meet demand.

With existing plant utilization already at full and to capture robust demand of glass wool, PGF is undertaking a timely two-phase expansion of its glass wool manufacturing capacity in Kulim, Kedah, which will more than triple its annual capacity from 25,000 mt/year to 85,000 mt/year by 1H2028. Besides, PGF also aims to re-enter the other countries within ASEAN market to diversify its customer base, revenue and lower inventory level from its upcoming capacity ramp-up, despite lower margins. With 1st phase new plant’s full commissioning by early FY27E, we expect a temporary dip in overall utilisation rates during the initial ramp-up phase. However, PGF’s glass wool average selling price is expected to moderate in FY26-27E due to initial capacity ramp-up.

Unlocking its undervalued land.

PGF is unlocking value from its 1,311-acre landbank in Tg. Malim, Perak adjacent to Proton City and the RM40bn AHTV, via a RM4bn GDV master plan spanning property development and agrotourism. With the land carried at a book value of RM2.94 psf versus an estimated market value of ~RM40 psf, there is upside potential for >10x asset revaluation. The AHTV is set to draw RM32bn investments and 50,000 new residents (from relocation of Proton’s entire production to Tg. Malim), fueling strong housing demand in Tg. Malim. With only 13,143 homes built versus a projected demand of 33,000 units by 2035, PGF stands to benefit from pick-up in housing demand as one of just two major landowners in the locality. PGF has earmarked 400 acres for RM3bn GDV property projects, starting with a RM600m JV with Malvest (monetise first) and a future in-house development with Nexel Group. The remaining 911-acre land will be developed into agrotourism assets including durian plantations, aquaculture, and a boutique resort, aiming to add recurring income streams.

Risk factors for PGF include (1) Regulatory risk; (2) Foreign exchange rate fluctuation; and (3) Supply chain disruption.

Investment Merits

Glass mineral wool manufacturing remains the key earning driver

Established player in glass mineral wool manufacturing. PGF is a key player in the Malaysia’s glass mineral wool manufacturing industry, with a proven operating track record since 1984. The Group’s primary manufacturing facility is located in Seberang Perai, Penang, encompassing approximately 38,614 sqm of integrated manufacturing and warehousing space. As at FY25, this plant comprises two continuous production lines and a gas-fired furnace, operating on a 24/7 basis with an annual installed capacity of 25,000 mt/year. Despite of increased competitive pressure with the entry of Knauf, PGF retains its strategic edge through its early-mover advantages and the strategic shift to focus on Australian and New Zealand market.

Extensive usages making glass mineral wool a preferred material. Glass wool is a type of economic and environmental-friendly materials that are used for non-combustible thermal and acoustic insulation. With its extensive industrial and infrastructure applications, this has enabled PGF to secure diversified orderbook. Key notable projects involvement include:

• FOCUS Apartments and UNO Tower in Melbourne, Australia
• Western Sydney International Airport (Nancy-Bird Walton Airport)
• Sound barriers for the Setiawangsa-Pantai Expressway (SPE) in Malaysia
• Viaduct Noise Barriers in Singapore
• Acoustic solutions for Golden Screen Cinemas (GSC) outlets nationwide

Production capacity expansion to cater for growth

To cater for expanding demand of glass mineral wool driven by the stricter energy efficiency regulation in both Oceania and Malaysian market, PGF is expanding its glass mineral wool production capacity through a two-phase plant development on a newly acquired freehold industrial land in Kulim, Kedah. Upon completion of both phases, PGF’s total installed capacity will reach 85,000 mt/year, representing a more than 3x expansion from current levels.

We view this strategic capacity expansion as a timely move for PGF to capture greater market share in existing and new markets. Beyond supporting top-line growth, the scale-up is expected to enhance cost efficiency and margin profile, as the Group will no longer need to source finished goods from third-party suppliers to meet excess demand.

Unlocking its land value in Tanjong Malim, Perak

PGF holds a sizeable landbank of approximately 1,311 acres in Tanjong Malim. A key re-rating opportunity has now emerged with the launch of the Automotive High-Tech Valley (AHTV), a major national initiative led by RM40bn joint venture between DRB-Hicom and China’s Zhejiang Geely, which is expected to catalyse up to RM32bn in investments. This has triggered a marked uplift in surrounding land valuations. PGF’s land parcel is debt-free and carried at a book value of RM168.1m or approximately RM2.94 psf as of February 2025, representing a steep discount to the current market valuation of around RM40 psf, based on our own channel check. This implies a potential more than 10x uplifting in the net asset value.

Strong property demand but lack of supply in Tanjong Malim.

According to the forecast under the RTD Muallim 2035, the district population is expected to grow to 158,000 by 2035, with housing needs of 33,000 units. Based on the latest data published on September 2023, there are total of 13,143 housing units has been built in the Muallim. This shows that there is still significant lack of supply of new houses in the district. PGF is one of the 2 largest land owners in Tanjong Malim after the DRB-HICOM.

Launched its 4.0bn GDV master development plan for next 15 years.

PGF has outlined a dual-pronged land utilization strategy aimed at delivering both cash flow generation and long-term earnings sustainability:

1. Property Development (400 acres): PGF plans to unlock value from its Tanjong Malim landbank through residential and mixed-use development, targeting demand arising from the Proton-AHTV supply chain ecosystem and the expanding student population of UPSI. The Group has allocated 400 acres for this initiative, with an estimated total GDV of RM3.0bn, to be rolled out in multi-phased development over the next 10-15 years.
2. Agrotourism Development (890 acres): PGF intends to unlock value from the remaining 890 acres through the development of agrotourism and recurring income-generating businesses, including agriculture (10,000 durian trees) and aquaculture (53-acre facility).

Financial Highlights

PGF delivered a robust 4-year revenue CAGR of 18.9%, with topline expanding from RM65.1m in FY21 to RM155.0m in FY25. Looking ahead, we expect revenue continue to rebound, underpinned by sustained regulatory-driven demand in the Oceania market, incremental revenue contribution from its property development segment and commercial yield from its durian plantation starting FY27. We forecast revenue growth of 24.3% to 62.6% over FY26-27E.

PGF’s PBT margin experience significant volatility between 5.1% and 30.3% over FY21-FY25, primarily due to significant non-recurring items. Going forward, we anticipate the PBT margin to improve further and stabilize between 21.5% to 23.8%, underpinned by high-margin contributions from the first phase Tanjong Malim land development and enhanced operating leverage from its expanded production facility.

As at 28 February 2024, the balance sheet of PGF remains at net debt position, translating into gearing ratio of 0.2x. We deem this gearing ratio to remain comfortable. Despite its modestly geared financial position, PGF remains committed to its dividend policy of a minimum 25% payout.

SWOT Analysis

Valuations

We initiate coverage on PGF with a BUY call and a SOP-derived TP of RM2.43. We derive our target price using Sum of Part (SOP) valuation. We assign a 10x target P/E multiple to PGF’s core glass wool insulation manufacturing division, based on our FY27E earnings. For PGF’s property development segment, we adopt a Revalued Net Asset Value (RNAV) approach, applying a 50% discount to reflect execution risks and lack of near-term earnings contribution. Together, we arrive at a SOP-derived TP of RM2.43, translating into a potential 40% upside.

SOP Valuation

Peer Comparison (as at 22 July 2025)

Key Risks

Regulatory risk for insulation.

As a manufacturer and exporter of glass mineral wool insulation products, PGF operates in a segment that is heavily influenced by building codes and energy efficiency regulations. Any delay, rollback, or loosening of these regulations could soften demand growth for insulation materials, undermining PGF’s growth trajectory, especially in the Oceania market, which contributes ~77% of the Group revenue.

Foreign exchange rate fluctuation.

PGF is exposed to foreign exchange rate fluctuation as approximately 81% of its revenue is primarily denominated in foreign currency versus its cost of goods that is mainly denominated in local currency (approximately 97%). Any adverse changes in the foreign exchange rate could result in severe negative impact on its financial performance.

Supply chain disruptions.

Supply chain disruption poses a key operational risk to PGF, given its reliance on efficient cross-border logistics. Delays in raw material supply or freight constraints could lead to higher costs, order backlogs, and potential margin compression.

Key Financial Data

Disclaimer & Disclosure of Conflict of Interest

The information contained in this report is based on data obtained from data and sources believed to be reliable at the time of issue of this report. However, the data and/or sources have not been independently verified and as such, no representation, express or implied, are made as to the accuracy, adequacy, completeness or reliability of the information or opinions in this report.

This report does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. Accordingly, investors are advised to make their own independent evaluation of the information contained in this report and seek advice from, amongst others, tax, accounting, financial planner, legal or other business professionals regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

This research report is being supplied to you on a strictly confidential basis solely for your information and is made strictly on the basis that it will remain confidential. This report is not directed to or intended for distribution or publication outside Malaysia. The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

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