MTAG falls on ACE Market debut after opening at premium

The company could not hold on to the early gains as sustained profit taking by investors saw it fall below its offer price


MTAG Group Bhd’s debut on the ACE Market yesterday ended on a sour note with an early price premium, triggering profit taking to the point the company’s share price ended well below its listing offer price at the end of its maiden trading day.

The counter opened 17 sen or at a 32% premium at 70 sen a share on its debut on Bursa Malaysia, but could not hold on to the early gains as sustained profit taking by investors saw it fall below its offer price of 53 sen to close the day down nine sen or 17% lower at 44 sen, valuing the company at RM300 million.

Some 288 million MTAG shares were traded on its maiden trading day.

In a recent report on the company, Inter-Pacific Research Sdn Bhd had ascribed a fair value of 62 sen on MTAG based on a valuation of 12 times price-earnings ratio (PER) pegged to MTAG’s fiscal year 2020 earnings per share of 5.1 sen inclusive of dividends.

The PER valuation of 12 times was slightly below the valuation range of listed local contract manufacturers of 13-22 times, according to Inter-Pacific.

The Johor-based printing and manufacturing company raised RM72.3 million from its initial public offering on the local exchange with the proceeds meant to buy land and raise printing and converting capacity.

Its MD Chaw Kam Shiang said the group has identified two suitable locations, either in Senai or Tebrau in Johor, for the group’s proposed new plant.

“The proceeds raised allow us to implement the growth strategies we have in place. The new manufacturing plant that we will be constructing is much larger than our current facility,” Chaw said in Kuala Lumpur yesterday.

He added that with the new machinery the company will be purchasing, MTAG’s capacity and capabilities will be enhanced, and enable it to capture a bigger market share and further establishing itself in the local label printing and converting industry.

MTAG will use RM33 million for the acquisition of a 10-acre (4.046ha) land for the construction of its new manufacturing plant.

Another RM13 million is allocated for capital expenditure involving the purchase of 11 new machinery, which will boost its annual production of labels and stickers to 636 million pieces from the current capacity if 324.5 million pieces.

The remaining RM10 million will be used to repay bank borrowings and RM12.5 million spent for working capital purposes.

“With the stage set and the expansion plans we have, we are thrilled with that lies ahead for MTAG. We will continue to leverage on our proven track record and our deep technical know-how to maximise value for our shareholders,” Chaw said.

According to an independent market report by Protege Associates Sdn Bhd, the local label printing and converting industry in 2019 is estimated to be worth RM5.92 billion and is projected to grow at a compound annual growth rate of 8.2% to RM8.11 billion by 2023.

The listing of MTAG Group is the eighth ACE Market listing for the year from a total of 21 listings in Bursa Malaysia year-to-date.

MTAG is a printing and materials converting specialist and has the capability to convert a variety of materials such as adhesive tapes and papers, mesh, plastics, foams and metals into predefined shapes and sizes.