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Author: kltrader   |   Latest post: Mon, 24 Jun 2019, 9:21 AM

 

Nova Wellness Group Bhd - IPO Report

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Group’s business expansion plan to drive growth

As part of the Group’s expansion plan, intends to utilise RM16.5m raised from IPO to construct a new GMP-compliant production facility for the production of functional food and skincare products. Production operations are expected to commence by 1Q2019 and production capacity for functional food is expected to increase from 0.69m bottles and 0.69m sachets to 3.43m bottles and 3.43m sachets. On top of that, by setting up its own in-house production for skincare products, Nova will have greater flexibility in production plans as well as focus on higher demand products and product variety.

Expansion of retail market presence

Nova plans to focus efforts to market the Group’s house brands in order to improve its retail market presence. Strategies include i) expansion of geographical footprint, ii) brand presence in the NWPP’s retail outlets, iii) online retail space, and iv) brand awareness campaigns. About RM5.0m from the IPO proceeds will be allocated for this purpose.

In-House R&D strength

The in-house R&D activities enable the group to expand its product range, improve its existing product to meet market demand and customer’s requirement and facilitate quickness to market.

VALUATION/RECOMMENDATION

We have a Buy recommendation with a target price of RM0.68 derived based on 15.0x PE of our estimated EPS of 4.6sen for FY19E. The target price represents a potential return of 23.0% over the IPO price with potential dividend yield of approximately 2.1%.

Source: Mercury Research - 19 Jul 2018

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