| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent strategic acquisition is set to significantly enhance the earnings outlook and diversify revenue streams for the company, prompting TA Securities to reiterate its “BUY” recommendation and marginally increase its target price.
The company, through its wholly-owned subsidiary, recently acquired a 33% equity interest in Nova Pharma Solutions Berhad (NPS) for RM18.2 million, or RM0.37 per share. This move subsequently triggered a mandatory takeover offer for the remaining NPS shares, with the clear intention to privatise and delist NPS. The acquisition, backed by a profit guarantee of at least RM15 million over 3.5 financial years, is not subject to a minimum acceptance condition, as the acquiring entity and its parties acting in concert already collectively hold more than 50% of NPS’s voting shares, ensuring execution certainty.
Strategic Rationale and Synergies
NPS, a LEAP-market listed entity, specializes in providing comprehensive engineering solutions for the pharmaceutical and biotechnology industries. Its expertise spans from conceptual and detailed design to turnkey engineering, procurement, construction, and commissioning for biopharmaceutical plants, vaccine facilities, and research and development laboratories across various global locations.
Analysts view this investment positively, highlighting it as a strategic step to bolster the group’s position across the construction value chain and enhance its competitiveness in higher value-added segments. NPS’s specialized expertise in pharmaceutical and biotechnology facilities complements the acquirer’s core strengths in construction management, turnkey delivery, and mechanical and electrical works. This synergy is expected to streamline end-to-end project execution, mitigate delivery and regulatory risks, and improve bid competitiveness for projects with stringent compliance and validation requirements.
Crucially, the acquisition also grants access to a new customer base among pharmaceutical and biotechnology players, thereby diversifying revenue sources and reducing reliance on traditional property development.
Financial Impact and Outlook
Following the completion of the 33% stake acquisition, TA Securities has revised its earnings forecasts upward to incorporate the anticipated contribution from NPS. Core net earnings estimates for FY26, FY27, and FY28 have been raised by 2.8%, 1.4%, and 1.2% respectively. The acquisition is deemed value-accretive, based on a compelling c.12.8x annualized PE multiple.
The investment bank reiterated its “BUY” rating, raising the target price marginally to RM0.25 (from RM0.20 previously) based on a target PE of 16x CY27 EPS. Confidence is underpinned by several factors: solid earnings visibility from a robust unbilled order book, strategic exposure to the high-growth data centre space, and resilient double-digit net margins.
