UMC: Strategic Land Acquisition Bolsters Future Growth Prospects, ‘Buy’ Rating Maintained

UMediC Group has secured a significant long-term land lease, a strategic move expected to underpin its capacity expansion and product diversification strategy in the medical consumables sector. Despite the long-term nature of the expansion, a prominent investment bank has reiterated its “BUY” rating for the company, signaling confidence in its future trajectory.

Strategic Expansion Details

The company, through its wholly-owned subsidiary UWHM Sdn Bhd, has entered into a conditional 60-year lease agreement with Penang Development Corporation (PDC) for a 3.1-acre industrial land in Batu Kawan Industrial Park 3. This substantial acquisition, valued at RM11.3 million, effectively adds an area approximately 2.7 times the company’s existing built-up space. The lease consideration is slated to be financed through a combination of internal funds and/or bank borrowings. The newly acquired land is earmarked for the development of a new manufacturing facility, with construction anticipated to commence in the second half of 2027 and reach completion by the first half of 2029. This strategic development is crucial for expanding UMediC’s production capacity and supporting product diversification within its medical consumables segment.

Addressing Capacity Needs

The expansion comes as UMediC’s existing Batu Kawan Industrial Park facility is operating at approximately 80% capacity, particularly for its HydroX Prefilled Humidifier series, which alone contributes about 90% of the manufacturing segment’s revenue. The additional capacity provided by the new land lease will be instrumental in scaling production for this high-demand product line. The company previously undertook a capacity expansion that boosted its manufacturing floor space by 67% to 50,000 square feet, increasing annual output capacity to 6-7 million units by 2025. The new 3.1-acre site offers significant headroom for further expansion and allows for diversification into new medical and life sciences products.

Investment Outlook and Risks

An investment bank maintains its earnings forecasts for UMediC unchanged, aligning with the expected completion of the expansion in 2029. The bank reiterates its “BUY” recommendation with an unchanged 12-month target price of RM0.51, based on a 17x PE multiple on FY27E EPS. The positive outlook is attributed to UMediC’s robust manufacturing segment growth trajectory driven by capacity expansion, strong global demand for its products, and a healthy pipeline of new offerings. However, potential downside risks highlighted include a slowdown in demand for medical equipment and operational disruptions.