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From LEAP to ACE: Fibromat’s Bold Step Toward Growth

Yo, ever wonder why hills don’t just slide away after a crazy storm? That’s Fibromat (M) Berhad saving the day! They whip up awesome stuff like erosion control blankets and vertical drains to keep dirt locked in place for roads, railways, or even fancy landscapes. It’s like tossing a cozy blanket over the ground to keep it chill and stable. Wanna know more? Let’s check out their hot new IPO and see how they’re leveling up!

Business Breakdown: What Does Fibromat Do?

Source: FIBROMAT IPO Prospectus

Fibromat (M) Berhad (“Fibromat”), through its subsidiaries helps protect land from erosion, which is when soil or sand gets washed away by rain, wind, or waves. They make and sell products like special blankets and mats that hold soil in place, so it doesn’t slide down hills, erode riverbanks, or damage roads and buildings. Think of it like putting a protective cover over the ground to keep it stable and safe.

They also offer services to design and install these solutions for things like slopes, embankments, or coastlines. Their products are often made from natural or synthetic materials and are used in construction, landscaping, and environmental projects to prevent land from wearing away and to make areas stronger and more sustainable.

How do Fibromat actually protect the land from erosion?

Fibromat will use the “Hydroseeding” method to protect the land from erosion. Hydroseeding is a fast and efficient way to plant grass or other plants on large areas of land, like lawns, hillsides, or eroded slopes. Think of it as spraying a special “plant smoothie” onto the ground to help grass grow quickly and evenly.

Here’s how it works in simple terms:

A mix is made of seeds (for grass or other plants), water, mulch (like shredded wood or paper to protect the seeds), fertilizer (to feed the plants), and sometimes a sticky substance called a binder to hold everything together.

  1. This mix is stirred into a big tank to create a thick, soupy liquid.
  2. The mixture is then sprayed onto the ground using a hose or a machine, kind of like watering a garden but with a souped-up sprayer.
  3. Once sprayed, the mulch in the mix keeps the seeds moist, protects them from wind or rain washing them away, and helps them stay in place while they start to grow.
  4. Over a few weeks, with water and sunlight, the seeds sprout and grow into grass or plants.

It’s like giving the ground a quick blanket of seeds and nutrients to kickstart a green cover, often used to prevent erosion, beautify areas, or restore land. Fibromat (M) Berhad may employ hydroseeding in combination with erosion control blankets to stabilize slopes or landscapes for erosion control projects. They place the blankets on the ground, followed by hydroseeding, allowing grass to grow and secure the soil within a few weeks.

How do Fibromat deal with soft land? 

Another product worth mentioning is the PVD product by Fibromat, called “Prefabricated Vertical Drain” (or Verti-Drain), is a tool used to make soft, squishy ground stronger and more stable for building things like roads, railways, or buildings. Imagine the ground is like a wet sponge full of water, the PVDs help squeeze that water out so the ground becomes firmer and less likely to sink later.

Here’s how it works in simple terms:

  1. PVDs are long, flat strips made of plastic wrapped in a special fabric.
  2. They’re pushed deep into the soft, muddy soil using machines.
  3. These strips act like tiny pipes that let water trapped in the ground flow up and out faster.
  4. As the water is removed, the soil gets packed tighter, making it strong enough to support heavy structures.

Think of it like poking straws into a soggy cake to drain the extra liquid so it holds its shape better. Fibromat’s PVDs are used in projects like building highways, airports, or ports where the ground needs to be solid and stable. However, the whole process generally takes about 6 -12 months only able to start the construction.

Source: FIBROMAT IPO Prospectus

Fibromat’s geotechnical solutions are used in a diverse range of project types such as projects for residential and commercial development, infrastructure development, land reclamation, road construction, railway construction, soil stabilisation, landscaping, and river and coastal protection.

The Basics: IPO Details & Key Dates

When it comes to IPO, the dates are common and must see.

  • Listing on: Bursa Malaysia’s ACE Market (Transfer from LEAP Market to ACE Market)
  • IPO Price: RM 0.55 / share
  • Market Cap: RM 136.55 million (based on the enlarged share base)
  • PE Ratio: 13.7x (FYE24 earnings)

Mark your calendars! The IPO opens on April 11, 2025, and closes on April 25, 2025. Balloting’s happening on April 30, and the listing date is set for May 8

Where’s the Money Going?

One of the first things to check in any IPO is how they plan to use the funds. Here’s the breakdown for Fibromat:

  • Purchase of machinery: RM 7.56 million (42.6%)
  • Working capital: RM 6.712 million (37.8%)
  • Estimated listing expenses: RM 3.48 million (19.6%)

Financials: Revenue Growth & Margins

Source: FIBROMAT IPO Prospectus

Next, let’s look at Fibromat’s financials.

  • Revenue: Fibromat’s revenue posted RM 75.46 million in FYE2024, compared to RM 68.30 million in FYE2023, increased by RM 7.16 million or 10.5%.
  • Gross Profit Margin (GPM): Fibromat’s gross profit margin achieved 27.44% in FYE2024 which higher than 25.09% in FYE2023.
  • Net Profit Margin (NPM): Net profit margin for Fibromat achieved 13.2% in FYE2024, up 0.8% from 12.4% in FYE2023.
Source: FIBROMAT IPO Prospectus

Based on the analysis of contribution to revenue by business activities, we can see that Fibromat’s top 1 contribution came from design and installation of geotechnical solutions, followed by trading of geosynthetics and erosion control products, last would be manufacturing and sales of in-house products. Fibromat’s principal market is in Malaysia, which accounted for 94.8%, 96.2%, 96.5% and 96.2% of the total revenue for FYE 2021 to 2024 respectively.

Balance Sheet: Financial Health at a Glance

The IPO proceeds for Fibromat mainly will be used for capital expenditures and working capital purposes, not to pay back the borrowings or loans of the company. Now, let us zoom into the balance sheet and look at the figure.

  • Long-Term & Short-Term Borrowings: As of FYE2024, Fibromat’s total borrowing stood at RM 11.56 million, with RM 5.67 million due within a year and RM 5.89 million payable later. Its gearing ratio stood at a very healthy level which was 0.2 times based on FYE2024 balance sheet.
  • Total Liabilities / Total Assets: As of FYE2024, Fibromat’s total liabilities over total assets stood at around 32%.
  • Cash and Bank Balances: As of FYE2024, Fibromat’s cash and short-term deposits stood at RM 5.78 mil, which is 7.2% of total assets and 50% of total borrowings.

Conclusion

Fibromat (M) Berhad’s future prospects appear promising, as highlighted during the Q&A session of the analyst briefing, where it was stated that the management is confident to achieve a 10% financial performance growth in FYE2025. Currently, Fibromat holds over 40 projects with a total value of RM 70 million. Moving forward, the company will focus on key projects, including the Pan Borneo Sabah, Sarawak-Sabah Link Road (SSLR), and the KL-Karak Highway (KLK) widening project. Additionally, the government’s budget allocation for flood mitigation is expected to directly support Fibromat’s business growth. However, it should be noted that the Penang LRT project is unrelated to Fibromat, as the company does not supply products for it.

From a challenges perspective, Fibromat faces 3 main challenges in this industry:

  1. Political uncertainties that may delay projects, such as LRT and MRT developments.
  2. Global economic slowdown, which could reduce infrastructure spending.
  3. Government budget constraints, affecting allocations for infrastructure projects.

In the context of the evolving ESG (Environmental, Social, and Governance) business landscape, Fibromat is well-positioned to contribute positively. Firstly, its products, such as erosion control blankets, are made from recycled and environmentally friendly materials, like coconut fiber. Secondly, the company’s environmental solutions align with ESG initiatives, further strengthening its commitment. As a result, Fibromat is on a strong path toward achieving ESG goals.

In summary, six years after its listing on the LEAP Market, Fibromat’s recent plan to transfer to the ACE Market signals positive growth prospects. With new capital expenditure and working capital funded by IPO proceeds, Fibromat is poised for sustained growth in the future.

Disclaimer: The information provided is for educational purposes only and does not constitute financial advice. Investment in securities involves risks, and investors are encouraged to do their own research or consult with a financial advisor before making any investment decisions.