SDS: Strategic Land Acquisition to Boost Production Capacity and Efficiency
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading food manufacturer has announced a significant strategic move with the proposed acquisition of 35.4 acres of freehold land in Johor Bahru for RM101.7 million. This development is poised to substantially enhance the company’s manufacturing capabilities and support its long-term growth trajectory.
The newly acquired land is earmarked for the construction of a new manufacturing facility, which will be strategically located in close proximity to the company’s existing plant. This expansion is considered crucial for bolstering production capacity and catering to the anticipated robust demand growth for its recently acquired snack brands, London and Tora.
Operational Enhancements and Future Outlook
The integration of this new facility is expected to yield substantial logistical and operational efficiencies. Analysts anticipate significant cost savings through optimized logistics, streamlined warehouse consolidation, and improved coordination across all stages of production and packaging activities between the existing and new manufacturing facilities.
The acquisition, valued at RM101.7 million, represents a marginal 0.3% discount to the estimated market value of RM102.0 million, as independently assessed by Cheston International (Johor) Sdn Bhd. The transaction is projected to conclude in the second half of 2026, with the new facility expected to be fully operational by the third quarter of 2027, pending shareholder approval at an extraordinary general meeting (EGM).
While this strategic investment is expected to increase the company’s net gearing to approximately 0.5x from a current net cash position, financial projections indicate that gearing will remain at a comfortable level below 1.0x. Current earnings forecasts remain unchanged at this stage, pending the finalization of the acquisition and greater clarity on development costs and timelines.
Analyst Recommendation
TA Securities maintains its BUY recommendation on the stock, citing the positive long-term impact of the acquisition on the company’s operational capabilities and market position. The investment bank believes the strategic expansion will solidify the company’s foundation for sustained growth in the competitive food manufacturing sector.
