Mercury Securities gives Teamstar’s fair value at 30.6 cents, based on a 12.5x FY26 P/E
https://theedgemalaysia.com/node/792199

Teamstar Berhad: Strategic Growth in Malaysia’s Home Improvement Sector

Target Price: RM0.320 (+23.08%)

IPO Price: RM0.260

Executive Summary

Teamstar Berhad, a long-standing player in Malaysia's home improvement industry with a 30-year track record, is making its debut on the ACE Market of Bursa Malaysia. With an IPO price of RM0.260, the company is positioned to capitalize on a resilient property market and a growing preference for organized retail. By vertically integrating its business from manufacturing-lite value-added services to extensive retail distribution, Teamstar has carved a unique niche that distinguishes it from general hardware stores.

Investment Thesis

1. Dominant Product Variation and Customization

As of the latest practicable date (LPD), Teamstar manages an impressive portfolio of approximately 27,800 SKUs. This vast range serves as a "one-stop center" for renovation contractors and DIY enthusiasts, fostering high customer stickiness.

Unlike traditional retailers, Teamstar’s ability to offer light manufacturing services; such as the slitting of edge banding jumbo rolls and custom chemical mixing for coatings, allows them to provide bespoke solutions that typical hardware chains cannot match.

2. High-Margin In-House Brand Strategy

A core strength lies in its 11 in-house brands, including 'Reno', 'Hauss', and 'DGTango'. These brands account for a significant portion of revenue and typically command higher profit margins than third-party products. By controlling the branding and sourcing of furniture fittings and hardware, Teamstar reduces its dependency on external suppliers and retains greater pricing power.

3. Aggressive Physical Expansion to Offset Saturation

While the Group recorded a negative same-store sales growth (SSSG) of -4.80% in the first nine months of 2025, largely due to market saturation in the Central region, it is aggressively pivoting toward new markets. The Group has allocated RM23.21 million (67.63%) of its IPO proceeds to set up 10 new retail outlets and 3 new warehouses. Strategic entries into Sabah, Sarawak, and the Northern region are expected to drive the next leg of volume growth.

Financial Performance and Valuation

Teamstar has demonstrated robust historical growth, with Profit After Tax (PAT) rising from RM9.9 million in FY2022 to RM16.85 million in FY2024. The IPO price of RM0.260 implies a Price-to-Earnings (PE) multiple of approximately 12.32 times based on FY2024 earnings.

When compared to the broader retail sector (median PE of 21.6x) and specialized distributors, Teamstar appears undervalued at its current entry point. Our Target Price of RM0.320 is derived from a forward PE of 15x on estimated FY2026 earnings, accounting for the additional revenue contributions from the new distribution centers and retail outlets.

Key Risk Considerations

- Inventory Efficiency: Inventory turnover days spiked to 148 days in FPE 2025. While management attributes this to stocking up for festive seasons, it indicates significant capital is currently tied up in slow-moving stock.

- Foreign Exchange Exposure: Approximately 27–30% of purchases are denominated in foreign currencies (USD, RMB, SGD), leaving margins vulnerable to Ringgit volatility.

- Regulatory History: The Group previously operated without certain manufacturing licenses and Sijil Siap dan Pematuhan (CCC) for specific premises. While these have since been regularized or are in progress, it highlights past governance oversights.

(Extracted from Internet)

Teamstar has been around since 1996 and now runs 29 retail outlets across Peninsular Malaysia under the Teamstar and Benova brands. They also sell 11 in-house brands and are an authorised dealer for 60 third-party brands