• Established in 1989, Nova Wellness Group Berhad (NOVA) is now involved in the development and production of nutraceutical products under its house brand and for its OEM customers.

• Rising demand for nutraceutical products, coupled with NOVA’s ongoing expansion of distributor network and production capacity are expected to drive the house brand segment’s growth.

• We initiate coverage on NOVA with a BUY call and fair value of RM1.08, based on 14.0 P/E pegged to its forward FY23f EPS of 7.7 sen.

Investment Highlights

• On-going expansion of market presence. We reckon NOVA’s on-going expansion plan which aims to increase the number of distributors to 1,100 by end-FY23 will be the key driver of its top line growth. Meanwhile, increased hospital adoption of NOVA’s products will lead to greater market acceptance and wider use of its products. Aside from local expansion, NOVA has obtained approval for a few products in Indonesia and Thailand to penetrate the international markets.

• Rising demand for nutraceutical products. The aging society, coupled with the increasing cost of modern healthcare may drive demand for nutraceutical products. Malaysia nutraceuticals market is projected to reach USD1382.3m by 2027 from USD794.4m in 2020 with a CAGR of 8.2% according to Research CMFE. The projected growth bodes well for NOVA as Malaysia accounts for more than 98.0% of its sales.

• Capacity expansion to capture rising demand. The construction of Phase 1 of its new plant for the production of functional food has completed in FY20, while Phase 2 for the production of skincare products is well underway. We believe the additional production capacity will allow the group to capture the rising demand for nutraceutical products in the market.

Source: Mplus Research - 20 Jun 2022