Sedania Innovator Bhd (SEDANIA) is in for some exciting times via its recent venture into the Health Technology (HealthTech) sector. Its Green Technology (GreenTech) segment is set to see resumption of project deployment and its equity interest in Esports is set to bring the group into spotlight. All in all, SEDANIA is offering a unique investment proposition. BUY with target price of RM1.10 based on 23x FY22 PER as per the average valuation between healthcare players and FBM Small Cap Index.

SEDANIA’s venture into HealthTech via the 51% acquisition of Offspring Inc. Sdn Bhd (Offspring) in Jan 2021 and is set to become a core earnings contributor moving forward. Offspring is a HealthTech company focusing on premium early childcare solutions with products ranging from baby diapers, wet wipes and household products being developed and manufactured in Australia. Currently, the organicbased products player has presence in 12 countries and is looking to expand to over 20 countries (eg: Spain, Finland, Korea, Thailand) by this year with huge potential market size of over RM300m/year. In terms of market positioning, Offspring sets its sight at millennial parents (24-35 years old) and ~60% of sales are from online with more online sales channels to be added later. HealthTech will continue to be the growth engine with new markets such as China and Middle East leveraging on Jakel Group’s distribution network (Note: Jakel Group’s managing director is a substantial shareholder).

As for GreenTech segment, SEDANIA has recently secured an additional 24 sites from Telekom Malaysia (project value of RM30mRM45m) for energy performance contract (EPC). We believe SEDANIA is well-positioned to ride on the booming ESG (Environmental, Social and Governance) trend as corporates are adding emphasis on energy efficiency and reducing carbon emission. Revenue model is based on recuring basis and SEDANIA is in discussion to secure more projects, with estimated value of RM95mRM125m, including a potential 600 sites EPC project with Jakel Group.

SEDANIA’s 36.2% equity interest in Esports Pte. Ltd, a provider of global Top 5 Esports tournament and platform – Esports Players League is gaining traction within global gamers rapidly. The group intends to expand footprint to 30 countries from 16 countries presently taking advantage of this scalable business model and targeting to build the business into Unicorn status eventually. SEDANIA also offers Islamic FinTech solutions to over 71 financial institutions in Malaysia. Potential upcoming project with Jakel Group includes Buy-Now-Pay-Later eWallet services to Jakel’s 7m customer base. Moving forward, we expect SEDANIA to achieve record year with projected net profit of RM11.7m in FY21 and RM16.5m in FY22, mainly contributed by HealthTech segment.

Source: Rakuten Research - 9 Jul 2021