SUPERLN (7235) - Superlon - Emerging Star Player

Superlon Holdings Berhad (Superln - 7235) had a history dated back to 1992, where the company started it's venture dealing with nitrile butadiene rubber (NBR) foam, a core insulation material. In 2007, Superlon became public listed in the second board, raising RM 8.9 million from the IPO. Till date, Superlon is carrying a market capitalization of approximately RM 160 million after 9 years of public listing.

However, a detailed analysis on Superlon saw the company started to pick up on revenue during 2014, which had lasted throughout 2015, and doesn't seem to see any stop in 2016 as well. While the global market remain challenging due to volatile raw material prices as well as currency fluctuation, what is the strategy that Superlon is going to employ to ensure the continuation of the growth of the company ?

Growing with the Asian Market

The Asian market had saw much accelerated growth for the past 5 years. Emerging market continue to boost industrial output and consumption due to rapid infrastructure development. According to Transparency Market Research, the insulation (fiberglass, plastic foam, mineral wool) market for residential construction, industrial, HVAC as well as non residential construction appliances will see a CAGR of 8% between 2014 to 2020. The market is projected to rise to USD 64.91 billion in 2020, in which much of the growth will be focused in the Asian, especially the emerging market. While Fiberglass will account for more than 42% of the overall insulation material, following tightly behind will see Plastic Foam, which is almost 40%.

Due to the rapid development of the property and construction segment in the emerging Asian market, there had been massive spillover effect into the demand on building's facilities work. As for Superlon that provide solution and services related to the HVAC & R (Heating, Ventilation, Air-Conditioning & Refrigerator), it will resemble one of the main beneficiaries from the continuation of this growth. With the rising demand for air-conditioning from building to heat and sound insulation of the passenger car, Superlon is well positioned currently to capture this growing market.

One of the proven beneficiaries from the rising development of property and construction sector is United U-Li Corporation Berhad (Ulicorp), which offers cabling system for buildings and infrastructure.

Ulicorp had been rising since middle of 2014 from a price range of RM 1.00 to the current price of RM 5.49 at 3rd of June 2016, with a total dividend of RM 0.25 per share paid back to investor during the 2 year period.

Superlon - a potential replication of Ulicorp

There are much potential to see Superlon repeating the feat of Ulicorp. Several similarities that are identical includes :
- Adequate share base to provide liquidity without huge dilution in the earning of the share. (Ulicorp 145.2 million shares, Superlon 80million shares)
- Beneficiaries from the rapid development of property and construction in the Asian market region
- Good dividend policy that reward shareholder with at least 2 dividend per financial year.
- Strong and solid management
- Net cash company

According to technical reading, Superlon will continue to trade with the uptrend line due to solid and consistent growth. The current pricing of Superlon could be attractive after a few months consolidation at the price range of RM 2.00. Another point to note is that Superlon is also intersecting with the support line of the uptrend, which will possibly suggest a upward push.

Superlon Global
Distribution Network
With the consistent strong display of financial result on the 3rd Quarter FYE 2016, Superlon should be able to hit a high note for the final quarter of FYE 2016. According to sources, FYE 2016 will be looking to see revenue hitting near to the RM 100 million mark, with EPS hitting above 20 cents per share. Valuation at PER x 12 (factor in growth at current pricing) should give a fair valuation of RM 2.40 in near term for Superlon.

Moving forward, Superlon will continue to expand it's foothold in the Asian region, targeting on emerging market segment. The penetration into the India market will be a great opportunity for push Superlon into a greater growth in the future.

Bone's Mid Term TP : RM 2.40

SUPERLN (7235) - Superlon - Emerging Star Player