“The company boasts an impressive portfolio of reputable clients such as Burberry, Dior, Gucci, LVMH, DBS, Singapore Airlines, IKEA, etc, and has a track record in completing notable projects including: Marina Bay Sands Lunar New Year 2024; IKEA Alexandra Store Interior Fit-Out; and DinoQuest at Guixi Ecological Park in Chengdu, China,” Mo writes.
The analyst also likes the group’s business model, which provides high margins, high return on equity (ROE) and is cash generative.
“Dezign has been able to generate superior net margins of 13% - 15% and ROE of above 35% over the last two years, thanks to its asset-light, fully-integrated in-house capabilities and good execution business model,” Mo points out.
The company also generated a strong operating cash flow of $5.9 million and $6.1 million in FY2024 and FY2025, respectively. After including a net $4.8 million in IPO proceeds, Dezign Format will sit on a net cash position of around $11.2 million in August, Mo adds.
See also: IPO hopeful Dezign Format brings creativity to Catalist
Looking ahead, the analyst sees Dezign Format’s business growth to be driven by rising demand for meetings, incentives, conferences and exhibitions (MICE), experiential events, new virtual reality LBE projects and its production hub in Malaysia. The Malaysian hub is expected to begin its operations by the end of 2025 and is said to be able to help improve project delivery time and save costs.
“Dezign generated an impressive two-year revenue and earnings CAGR (compound annual growth rate) of 35% and 77% respectively for FY2022 - FY2024. We expect a healthy orderbook of $24 million as of Dec 31, 2024, to drive a healthy core earnings growth of 20%/16% for FY2025/FY2026 respectively,” Mo writes.
Mo’s target price of 37 cents is based on an FY2026 P/E of 10.5 times, representing a 10% discount to its peers’ average. Based on her estimates, the company generates a superior net margin of 14.4% and dividend yield of around 4% for FY2026.
See also: CGSI's Ong raises target price for BRC Asia to $4.30 on healthy industry fundamentals
Mo’s patmi forecasts for FY2025 and FY2026 are at $5 million and $7 million respectively.
As at 1.17pm, shares in Dezign Format are trading 0.5 cents higher or 1.64% up at 31 cents.
See also:
- Dezign Format lodges preliminary offer document for Catalist listing
- IPO hopeful Dezign Format brings creativity to Catalist
- Dezign Format seeks to raise $4.8 mil in net proceeds with launch of 32.5 mil shares at 20 cents each
- Dezign Format raises $6.5 mil; trading of shares to commence on Aug 15
- Dezign Format closes at 28 cents on debut trading day
