Total chemical solutions provider TMK Chemical Bhd's three-year revenue is expected to grow 18% CAGR supported by steady sales volume amidst margin expansion via vertical integration further elevated by potential acquisition deals, leading to a fair valuation of RM2.09 which is 19% above its listing price of RM1.75, according to RHB Investment Bank Bhd Small Cap Asean Research (RHB Research).

Analysts have assumed a net margin expansion to 9%-10% in FY20241 to FY2026, from 7% in FY2023, resulting in the three-year earnings CAGR of 18%.

TMK is principally involved in the provision of total chemical management comprising sourcing, processing and distributing of inorganic chemicals and value-added services, as well as the provision of chemical terminal services. The inorganic chemicals offered comprise acids,
alkalis, salts and other chemical products used in a wide range of industries. Additionally, the group is involved in inorganic chemicals manufacturing.

TMK has a strong regional presence in Southeast Asia given its 15 facilities, two terminals and a manufacturing plant across Malaysia,
Singapore, and Vietnam.  

TMK aims to raise RM385 million from its Initial Public Offering (IPO) scheduled to be listed on 12 December 2024. The proceeds from the IPO will be allocated primarily to fund its potential acquisition and expand its chemical manufacturing business and facilities overseas.

As reported, the chemical group will allocate 26% of the IPO proceeds to acquire chemical-related companies to complement its current businesses. Additionally, the group is looking to spend 23% of the proceeds to expand its manufacturing plant in Banting and 13% to construct a new facility in Singapore. The doubling of manufacturing capacity is meant for vertical integration which could result in margin expansion.

1. FY2024: Financial year ending 31 December 2024 ︎