PETALING JAYA: In light of NationGate Holdings Bhd’s acquisition of Valeo Malaysia CDA Sdn Bhd, Kenanga Research has raised forecasts for the electronics manufacturing services group for next year.
The research house raised Nationgate’s projected revenue by 2.4% to RM7.6bil and net profit 6% to RM145mil for next year.
The research house said the RM60.9mill deal for Valeo, a producer of automotive components, is in line with the NationGate’s strategic leap to explore long-term growth opportunities and enhanced value within the automotive supply chain.
Kenanga Research also raised the company’s target price from RM1.08 a share to RM1.15, reiterating its positive stance with an “outperform” rating.
The valuation is at an unchanged 18 times price-earnings (PE) ratio applied to NationGate’s earnings per share forecast for next year.
Although the diversification indicates NationGate’s capacity to hedge its volatile data computing segment, which includes servers for artificial intelligence use, Kenanga Research said the decision signals the “broader sector-wide uncertainty arising from ongoing supply-chain relocation dynamics”.”
The recent acquisition has an implied PE ratio of about 4.7 times based on Valeo Malaysia’s recovering earnings trajectory. The research house added that the deal appeared to be earnings accretive for NationGate.
“Given the similar business profile, encompassing electronics assembly, testing, and related manufacturing services, the transaction does not materially alter NationGate’s overall risk profile,” Kenanga Research stated in a report.
Instead, the acquisition is anticipated to improve scale, operational synergies, and customer diversification in the long-run.
Kenanga Research retained its favourable view on NationGate for its exposure to fast-growing industrial equipment used in telecommunications networking infrastructure, its Industry 4.0-ready facilities to take on more complex work and value-added services.