IPO Watch Limited upside for Kanger, says Alliance IB Research

by **Cals** Fri 13 Dec 2013, 08:35

IPO Watch Limited upside for Kanger, says Alliance IB Research
Business & Markets 2013
Written by theedgemalaysia.com
Friday, 13 December 2013 06:38

KUALA LUMPUR (Dec 13): There is limited upside for bamboo flooring and related products manufacturer Kanger International Bhd which is set to list on Bursa Malaysia’s ACE Market later this month, according to Alliance IB Research.

In a note Dec 12, Alliance IB Research analyst Tan Kee Hoong said Kanger mainly markets the bamboo flooring products under its own brands, i.e. “Kanger” and "Kanger Masterpiece”.

Tan said the company also serves as an OEM for B&Q China which is one of the largest western home improvement retailers in China.

“Despite management’s plan to expand the number of appointed dealers by 50% in 2014, we are cautious on the group’s earnings prospect given the substantial competition risk in the industry. Customer concentration risk is also a major concern.

“We believe that it is fully valued based on its IPO price offering of 25 sen, leaving limited upside for investors,” said Tan.

The analyst said that additionally, China-domiciled stocks listed in Malaysia were currently trading at a much cheaper valuation, with CY12 P/E ranging from 1.5x to 5.1x.

“Dividend yields of some of these stocks are also fairly attractive. As such, we believe it is likely for Kanger’s valuation to de-rate post-IPO,” said Tan.

Kanger is set to make its debut on Bursa Malaysia on Dec 23, with the initial public offering closing date today (Dec 13).