Critical Holdings Bhd, a service provider for critical facilities, has been slated for an initial public offering (IPO) with a valuation range of 40-43 sen per share, according to a recent IPO flash note from Apex Securities Bhd. The firm, which is preparing for its debut on the ACE Market, has set a competitive IPO price of 35 sen per share and is trading at a price-to-earnings (P/E) ratio of 13.6 times for the fiscal year 2023.
The company specializes in service and maintenance on a project-by-project basis, catering to a variety of sectors such as semiconductors, renewable energy, pharmaceuticals, and healthcare. Critical Holdings offers solutions for data centers, cleanrooms, and plant rooms, highlighting its diverse capabilities in managing complex environments.
However, the company's business model, which relies heavily on project-based contracts, carries inherent risks. A significant portion of its revenue comes from its top five clients, which contributed between 46% and 68% from FY2020 to FY2023. This concentration of revenue sources could pose financial risks if client relationships are disrupted.
Moreover, Apex Securities noted that Critical Holdings faces potential liquidated damages due to contractual risks. Delays or substandard workmanship could lead to claims from clients, which is a common hazard in the industry.
Despite these risks, the valuation and P/E ratio suggest that Critical Holdings is entering the market with a modest valuation compared to its industry peers, Kinergy Advancement Bhd and Pansar Bhd. The IPO price of 35 sen per share is considered attractive, providing an opportunity for investors to engage with a company that plays a vital role in maintaining critical infrastructure across several key sectors.
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