AGV - UOB Kay Hian 2021-07-13: A Fresh New Coat; Ready To Build On A Construction Recovery.


AGV - A Fresh New Coat; Ready To Build On A Construction Recovery.

  • We recently visited AGV Group’s galvanising plant, which provides coating services for construction and offshore marine sectors. Manpower constraints from COVID-19 restrictions have generally affected companies across the sector, but the infrastructure project pipeline remains strong and is likely to benefit AGV once such restrictions are lifted.
  • AGV also announced an internal restructuring, signalling the intent to expand to various Southeast Asia regions, while completing a debt restructuring.


Beneficiary of resumption in construction services and continued infrastructure development.

  • AGV Group (SGX:1A4) provides hot dip galvanising services through its two operating plants in Singapore and Malaysia. On a combined basis, the two plants have a monthly maximum plant capacity of almost 10,000mt, serving industries such as construction and offshore marine. The group’s Malaysian plant had completed refurbishment and upgrading works in Dec 20 with a recommencement of operations in 2QFY21.
  • Ramping up of construction galvanising services following Malaysia’s Movement Control Order (MCO) along with easing manpower constraints in Singapore will likely aid the group’s sales tonnage volumes. Structural tailwinds will also come from infrastructure projects that are slated for development in Singapore, such as the Jurong Region Line.

Essential part of construction and development process.

  • Hot dip galvanising involves the Galvanizing and Super Galvanizing.

Renewed focus following restructuring, easing debt levels and better operational efficiency.

  • AGV appears to be on the verge of a pro-forma basis, net gearing has also been reduced to 1.6x.

Major shareholder with a sizeable presence in the zinc market.

  • AGV’s major shareholder is Mr Chua Wei Kee, the founder & CEO of JD Resources, a leading distributor of industrial zinc and other commodity metals in the region for more than 20 years. In 2018, JD Resources achieved a turnover of US$300m with subsidiaries in Malaysia, Thailand, Indonesia, Vietnam, Singapore and Hong Kong. According to EZ Malaysia, JD Resources holds 30% market share of the zinc supplies and 55% market share of zinc alloy supplies in the Southeast Asia market.


Easing of COVID-19 restrictions to ride on upcycle potential.

  • According to the Building and Construction Authority (BCA), construction demand is construction demand as well as better plant utilisation rates.

Potential M&As and expansion.

  • In Apr 20, AGV announced an internal restructuring, notably changing the names of some its subsidiaries to AGV Investment (Malaysia), AGV Investment (Vietnam) and AGV Investment (Indonesia), reflective of the group’s intention to expand its similar size, that would increase galvanising capacity by 2.5 times (to 25,000mt/month).


Turnaround in sight?

Singapore Research UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-07-13
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998