MEGA Fortris Bhd (KL:MEGAFB), a security seals specialist that is scheduled to list on the Main Market of Bursa Malaysia on Monday (Nov 11), is moving forward with two major expansion plans. The group plans to put up a new plant in the UK to enhance its support of e-commerce giant Amazon.com Inc and also a new factory in Macau to supply casinos with security-sealed playing cards.

Whether it is the logistical advantages of a facility in the UK or tapping the booming demand in Macau, Mega Fortris group managing director and CEO Datuk Adrian Ng Meng Poh says that the group wants to be where clients need it the most.

“Having a plant in the UK not only brings us closer to Amazon — one of our key clients there — but also positions us to better serve other European markets. Clients like Amazon expect fast response times to address their security needs, and having a local facility, located just across from theirs, helps us achieve that,” he tells The Edge in an interview.

Interestingly, the name Mega Fortris might sound similar to another Bursa Malaysia-listed company, Mega First Corp Bhd (KL:MFCB), and that’s because of the shared history between the two — specifically, a joint venture (JV) that began in the early 2000s that laid the foundation for the former’s current name and direction.

“Expanding our footprint into the UK has been on my mind for some time. Part of it is sentimental because we had a major breakthrough in this industry with a successful JV with MFCB in the UK. So, the idea of setting up a facility in the UK has always felt right,” says Ng.

In 2000 to 2001, Ng’s family company Fortris Malaysia Sdn Bhd (FMSB) had partnered with MFCB in a JV by forming Bloxwich Security Products Sdn Bhd wherein MFCB held a 51% stake and FMSB the remaining 49%.

“In 2008, we decided it was time to take full ownership. We bought out MFCB’s 51% stake, turning Bloxwich into a wholly-owned subsidiary, which we then rebranded as Mega Fortris (M) Sdn Bhd, and it eventually became the listed company today,” Ng recaps.

But the primary driver for the UK venture is that it makes business sense.

“Amazon has a significant presence there. With a local facility, we can better meet Amazon’s needs, ensuring timely delivery of our security solutions,” Ng reiterates.

Mega Fortris already has a UK sales office. Its plan is to build a new factory in Bloxwich, Staffordshire, and to double its UK workforce of about 20 currently to around 40.

“We do not need to hire a lot of people as our UK factory will be fully automated. But at the same time, we want to be asset-light. So, we will not buy the land. We will lease it. In other words, the RM42.98 million that we have allocated for the UK venture is mostly for buying equipment,” Ng says.

Although the investment period is over three years, Mega Fortris hopes to commence its UK operation by early next year.

“Our planned annual capacity to be installed in the UK is over 200 million pieces of security seals, but of course, this will come on stream progressively.”

Mega Fortris last month launched an initial public offering (IPO) to raise more than RM198 million. The 42.25 million new shares offered to the Malaysian public via balloting were oversubscribed by 7.18 times.

Priced at 67 sen per share, the IPO involves a public issue of 147.87 million new shares and an offer-for-sale of up to 147.87 million existing shares, according to its prospectus unveiled on Oct 21.

At its IPO price, Mega Fortris would debut with an estimated market capitalisation of RM566.13 million, reflecting a valuation of around 29.13 times its earnings for the fiscal year ended June 2024 (FY2024) of RM21.6 million on revenue of RM166.7 million. This translates into a net profit margin of 13%.

In FY2024, European markets contributed 30% of Mega Fortris’ turnover, while the US and Malaysia each made up 27%. Asia-Pacific and the Middle East accounted for the balance.

Proxy to casino markets
Over the years, local investors seeking exposure to gaming stocks have had to choose between Genting Bhd (KL:GENTING), Genting Malaysia Bhd (KL:GENM) and RGB International Bhd (KL:RGB). However, with the upcoming listing of Mega Fortris, investors have a fresh alternative, as the company serves as a proxy for the Asian casino markets.

Mega Fortris produces up to 530 million pieces of security seals annually, which are used on boxes of playing cards, containers and cables to prevent tampering and secure goods during transport and storage.

With products used in about 120 countries, its 3,000 to 4,000-client portfolio includes 39 casino operators across Asia, including in Macau, the Philippines, Vietnam and Cambodia. The company has sales offices in 12 countries, including the US, Hungary, France, Singapore, Hong Kong and Australia.

Ng points out that Macau’s leisure and entertainment industry is a natural extension of Mega Fortris’ expertise in security solutions.

“We believe Macau would offer us tremendous opportunities in casino consumables. In fact, we’ve already established ourselves in this sector by supplying security boxes and seals to major casinos, contributing about 6% to our group’s turnover. But for us, this is just the beginning.”

Mega Fortris plans to set up a new factory in Macau specifically to produce playing cards, which is a highly consumed commodity in the casino sector. Moreover, the market for playing cards in Asia is huge, especially in Macau.

It is learnt that casinos in the region go through roughly 160 million decks of cards every year and, right now, two main players — one from Belgium and the other from Japan — dominate the supply.

Ng opines that a factory in Macau would put Mega Fortris right in the heart of this demand, enabling the group to deliver quickly and at scale, which is crucial in the gaming industry where the product life cycle is fast-paced.

“With a factory in Macau, complemented by our current plant in Kota Kemuning [Selangor], we aim to compete head-to-head and gain significant market share from the Belgian and Japanese suppliers,” he says.

Mega Fortris is backed by Singapore’s Oversea-Chinese Banking Corp (OCBC) with the second largest bank in Southeast Asia by assets holding a 9.45% stake in Mega Fortris’ holding company Mega Fortris Global Pte Ltd (MFG). Additionally, the Singapore bank also has an indirect 16.54% stake in MFG via its investment entity Lion-OCBC Capital Asia I Holding Pte Ltd.

Ng and his family members, via their family vehicles Mega Fortris Capital Sdn Bhd (MFC) and Ng Brothers Estate (NBE), own a 14.78% and 59.23% stake, respectively, in MFG.

Post-listing, MFG will retain a 65% controlling stake, or 549.23 million shares in Mega Fortris, after pocketing RM99.07 million from offer-for-sale shares via a placement exercise. The listed company has committed to a dividend policy of distributing 30% of its profit after tax.

Meanwhile, the RM99.07 million to be raised from the public issue will largely fund expansion efforts within the next three years. Mega Fortris intends to allocate RM42.98 million, or 43.38% of the proceeds, towards setting up the UK factory. Another RM45 million, or 45.42% of the fresh capital, is earmarked for a new business venture in Macau to supply playing cards in sealed security boxes. The remaining funds will support working capital needs and listing expenses.

RHB Investment Bank Bhd is the sole principal adviser, joint underwriter and joint placement agent for the IPO, whereas AmInvestment Bank Bhd is the joint underwriter and joint placement agent for the listing exercise.