Kumpulan Perangsang Selangor Berhad - Transition Towards a Focused Manufacturing Play
Fri, 15-Aug-2025 08:15 am
by Steven Chong • Apex Research

Counter

KPS (5843)

Target Price (RM)

0.61

Recommendation

Hold

  • Kumpulan Perangsang Selangor (KPS) operates a manufacturing-centric business model, focusing primarily on providing integrated electronics, plastic injection moulding as well as paper packaging solutions.

  • The Group serves a broad range of end-markets including consumer electronics, automotive, healthcare, and industrial sectors.

  • Core earnings growth will be driven by (i) sustained growth trajectory in its core manufacturing operations, (ii) resumption in order commitments from improving macro environment, and (iii) expanding profit margins as the Group moves past its earlier restructuring phase.

  • We initiate coverage on KPS with a HOLD rating and a target price of RM0.61, based on 10x PE multiple applied to FY26F EPS of 6.1sen and a three-star ESG rating. The assigned PE multiple reflects a 24% discount to the selected peers’ average of 13.1x, to account for KPS’s smaller market capitalisation and lower profit margins relative to its peers.

 

Key Investment Highlights

On track on gaining growth momentum. KPS is on track to regain growth momentum, supported by a low base effect and improving performance across its manufacturing units. We expect Toyoplas and CPI to be the key growth drivers, underpinned by i) demand recovery in the electronics segment, ii) margin expansion from cost-saving efforts, and iii) the completion of earlier streamlining and restructuring initiatives.

 

On a look out for new acquisition opportunities. KPS is actively building a war chest for future acquisitions, particularly within the manufacturing space, following the disposal of Kaisercorp. Its transition to a net cash position in FY24 has significantly improved its financial strength. This positions the Group well to pursue strategic and value-accretive expansion opportunities.

 

Resilient against global headwinds. KPS is relatively shielded from escalating global trade tensions, thanks to its strong domestic orientation. Direct exposure to the proposed U.S. reciprocal tariff is minimal at c.4% of revenue, with U.S. contribution having declined sharply from 45.6% in FY21 to just 19.2% in FY24. This reduced reliance not only improves earnings visibility but also positions the Group more defensively amid ongoing supply chain realignments and geopolitical uncertainty.

 

Malaysia's competitive edge intact amid US tariff measures. With a competitive tariff rate of 19%—on par with peers such as Indonesia and Thailand and more favourable than Vietnam and Taiwan—Malaysia remains well-positioned under the US reciprocal tariff framework. This backdrop strengthens KPS’s ability to tap emerging export opportunities and ride the ongoing realignment in global trade flows.

 

Valuation & Recommendation. We initiate coverage on KPS with a HOLD recommendation and a target price of RM0.61, based on 10x PE multiple applied to FY26F EPS of 6.1sen and a three-star ESG rating. The assigned PE multiple reflects a 24% discount to the selected EMS peers’ average of 13.1x, to account for KPS’s smaller market capitalisation and lower profit margins relative to its peers.

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