NationGate Holdings Bhd (Stock code 0270), will be making its debut on ACE Market of Bursa Malaysia today. The group is a full-fledged Electronic Manufacturing Solutions (EMS) provider focusing on the assembly and testing of electronic components and products as well as semiconductor devices. Its clienteles are mainly MNCs from networking & telecommunications, data computing, industrial instruments, consumer electronics, automotive and semiconductor sector. The easing of supply chain disruptions with worker replenishments, we expect its earnings to achieve exponential growth over the next 2 years circa. 35% and 23% respectively. BUY with a TP of RM0.76 by ascribing 16x PER on FY23 EPS as per average PE of its peers on Bursa Malaysia.

With a 12-year track record, NationGate has a broad regional customer base spanning across Malaysia, Asia, US and Europe. Malaysia remains the largest revenue contributor accounting above 70% over the past 3 years. Turnkey business made up the largest of its total revenue, above 84%, followed by consignment contribution of about 12-16%.

NationGate’s 31 surface mount technology (SMT) assembly lines are flexible and modular thus allowing them to provide customizable assembly line to manufacture both high-mix-lowvolume and low-mix-high-volume set-ups. Its technical capabilities are further leveraged by a solid internal technical team comprising of 367 skillful engineers and technicians.

According to Protégé Associates Research, the domestic EMS industry is anticipated to grow with a 5-year CAGR of 10.3% over 2022 to 2027, buoyed by the increasing outsource of manufacturing operations from end-user markets. Coupled with the surging adoption of electronic content in traditional and nontraditional markets like automotive and consumer electronics, we are therefore upbeat on NationGate’s prospects, going forward.

The group earmarks RM5.93m of the IPO proceeds to increase its SMT assembly capacity by acquiring additional machineries and equipment to improve assembly efficiency from 1.26bn mounting point up to 1.3bn mounting point per month. Nonetheless, NationGate also develops the business collaboration with GoldTek and intends to tap into its global customer base.

As at 14 Nov 2022, the group has accumulated RM369.55m unbilled purchase order and provides earning visibility up to 12 months. Post listing, its gearing ratio will narrow from 1.55x as of 30 June 2022 to 0.50x. The company has no dividend policy at this juncture.

Source: Rakuten Research - 12 Jan 2023