Introduction to Mega Fortris Berhad

Mega Fortris Berhad, a prominent player in the global security seal market, is renowned for its innovative and robust security solutions. Established over 28 years ago, the company has cemented its position as the third largest security seal producer worldwide. With a comprehensive range of products including plastic seals, cable seals, and container seals, Mega Fortris is poised for significant growth driven by its international business operations and strategic expansion plans.

Strategic Growth and Expansion

Mega Fortris is navigating a promising growth trajectory, bolstered by recovering demand and a strategic push into horizontal integration within customer supply chains. This move is expected to catalyze earnings growth as the company aligns more closely with the logistics and requirements of its diverse clientele spanning logistics, petrochemicals, food and agriculture, retail, and the leisure and gaming industry.

International operations form the backbone of Mega Fortris’s revenue, accounting for 73-78% of income from FY21-24. The company’s global footprint extends across 120 countries, supported by 11 sales offices worldwide. This expansive reach positions Mega Fortris to leverage its in-house research and production capabilities to deliver customized solutions tailored to specific market needs.

Financial Performance and Key Metrics

Mega Fortris has demonstrated a remarkable three-year net profit CAGR of 53.5% from FY22-24, recovering robustly from pandemic-induced setbacks. The company’s financial solidity is reflected in its key metrics:

• Net Turnover: Increased from RM135.1 million in 2021 to a projected RM166.7 million in 2024.
• EBITDA: Expected to grow from RM17.6 million in 2021 to RM37.9 million in 2024.
• Net Profit (Adjusted): Soaring from RM6.0 million in 2021 to an anticipated RM21.0 million in 2024.
• EPS: Projected to rise from 0.71 sen in 2021 to 2.49 sen in 2024.

The company’s valuation remains robust, with a forward PE for FY25 estimated at 21.7x, which reflects a more palatable figure based on annualized core net profit.

Investment Highlights and Future Prospects

Mega Fortris is strategically positioned for future growth through several key initiatives:

• Regional Hub in the UK: The new UK facility is set to enhance production capacity by 200 million annually, simplifying logistics and ensuring just-in-time delivery across Europe.
• Gaming Industry Ventures: The venture into pre-shuffled playing cards aims to provide comprehensive solutions for the gaming industry, potentially expanding beyond Malaysia and Macau.
• Automation and Cost Efficiency: Upgrading production lines to automated systems is expected to reduce labor costs, driving margin expansion.

These strategic expansions are supported by the proceeds from Mega Fortris’s IPO, earmarked for both local and international growth initiatives.

Environmental, Social, and Governance (ESG) Initiatives

Mega Fortris is committed to sustainable practices, highlighted by its recycled material usage program with a minimum of 30% recycled content in plastic seals. Socially, the company has launched the Mega Fortris Jari Indai Cares project, focusing on women empowerment in Sarawak and supporting the Iban community. Governance is aligned with the Malaysian Code on Corporate Governance, ensuring high standards of corporate responsibility.

Conclusion

While Mega Fortris’s historical valuations may seem high, the company’s strategic growth plans and recovery to pre-pandemic levels suggest a promising future. The potential for earnings accretion, coupled with limited comparables in the market, positions Mega Fortris as a compelling player in the security seal industry.