CEO Morning Brief

NationGate Hits New Record High on First Mover Advantage, Deliveries of AI GPU Servers

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Publish date: Tue, 07 Jan 2025, 10:29 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 6): Shares of NationGate Holdings Bhd (KL:NATGATE) closed at a fresh high on Monday, after gaining 24 sen or 9.5% to RM2.76, becoming the fourth biggest gainer on Bursa Malaysia.

The stock earlier rose as much as 30 sen or 11.9% to as high as RM2.82.

Analysts covering NationGate are optimistic about its prospects, citing several key advantages that set it apart from its peers, and its shipment of Nvidia H200 and B200 AI GPU servers starting the first half of 2025.

According to Macquarie Equity Research’s initiation note on Jan 3, NationGate is one of the four elite Nvidia original equipment manufacturer (OEM) partners in the Asean region. It holds a first-mover advantage in Malaysia and is seen as a neutral OEM partner for non-US hyperscalers relocating their supply chain in the region.

The volume production of its B100/B200 servers in the second quarter of 2025, and acceleration in the second half of the year, are notable catalysts.

Macquarie also said NationGate is a direct AI proxy on Malaysia’s tech supply chain, with the highest AI revenue exposure and earnings trajectory among peers.

According to blended average data on Bloomberg, analysts forecast that NationGate’s revenue could grow 62.7% in 2025 to RM6.19 billion, and net profit would grow 57.6% to RM210.6 million. This translates to a forward price-earnings (P/E) ratio of 29.8 times, based on its market capitalisation of RM6.28 billion.

Macquarie has the highest target price for the stock, at RM4, derived from 43 times its forward price-earnings (P/E) ratio — based on a forecast net profit of RM210.2 million for 2025.

Currently, five out of six analysts covering NationGate have the stock on “buy”. The target price ranged from UOB Kay Hian’s RM2.10, to Macquarie Equity Research’s RM4.00, with an average of RM2.85. This implies a potential upside of 3.6% against its last close of RM2.75.

NationGate’s trailing price-earnings (P/E) ratio, now trading at 54.7 times, is highest among its peers. In comparison, according to AskEdge data, electronics manufacturing services (EMS) peers such as D&O Green Technologies Bhd (KL:D&O) is trading at 40.6 times P/E, followed by PIE Industrial Bhd (KL:PIE) at 36.4 times, Aurelius Technologies Bhd (KL:ATECH) at 35.6 times, VS Industry Bhd (KL:VS) at 19.9 times, and SKP Resources Bhd (KL:SKPRES) at 16.9 times.

The trailing return on equity (ROE) of NationGate was the highest among its peers, at 24.6%. The trailing ROE on SKP Resources was 21.4%, followed by Aurelius Technologies at 12%, PIE Industrial at 10.8%, VS Industry at 10.2%, and D&O at 7.1%.

NationGate’s net profit for the quarter ended Sept 30, 2024 (3QFY2024) more than doubled to RM46.59 million, from RM17.28 million in the same quarter last year, riding on a record-high quarterly topline, and helped by unrealised foreign exchange (forex) gains.

The company booked a net forex gain of RM76.22 million, based on its unrealised forex gain of RM138.2 million and a realised forex loss of RM61.98 million. Without this gain, the company would have posted a net loss of RM29.63 million. The group recorded a net forex gain of RM1.45 million in 3QFY2023.

Revenue jumped to RM1.35 billion, eight times the RM165.58 million it made last year, on higher demand under the data-computing segment.

On Aug 2, NationGate’s co-founder and managing director Ooi Eng Leong sold 103.69 million shares, or a 5% stake in the company, at RM1.96 per share, via a direct business transaction. Ooi still owns 1.24 billion shares, or 60% stake in the company.

Meanwhile, NationGate’s chief operating officer Lee Kim San has been trimming his stakes recently. Lee sold 600,000 shares between RM2.50 and RM2.55 in December. In the whole of 2024, he has sold a total 2.57 million shares, and is left with 12.91 million shares, or 0.57% stake in the company.

Source: TheEdge - 7 Jan 2025

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