Based on its latest annual report, we understand that NOVA has launched two newinitiatives: (i) the Nova Health Mart Licensing Programme and (ii) direct selling through multi-level marketing under the brand "ETERNER," both of which have the potential to drive revenue and earnings growth.
According to NOVA, ETERNER focuses on vibrant living, longevity, and natural wellness, offering products like preventive nutrition, protective skincare, and essential oils enriched with resveratrol, a powerful antioxidant. Individuals can join ETERNER as either distributors or customers.
ETERNER's Best sellers
Outlook: While we anticipate some positive developments in NOVA's direct selling segment, the ETERNER journey remains in its early stages, with measurable impacts likely to emerge only after a few quarters. This is due to the highly competitive direct selling market in Malaysia, where established brands are already ahead in offering age-defying products. Meanwhile, alongside the Nova Pharmacy Licensing Programme, NOVA has introduced the Nova Health Mart Licensing Programme, providing opportunities to own a health mart and expand its business. While these initiatives point toward business growth through an expanded distributorship and product offerings, based on recent quarterly results, we believe cost control is a more critical focus at this stage.
Valuation & Recommendation
Forecast. FY25f earnings are maintained at RM6.9m.
Maintain SELL with TP of RM0.305. We maintain a SELL recommendation with a target price of RM0.305, based on a P/E multiple of 14.0x applied to FY25f EPS of 2.17 sen. NOVA's dividend policy commits to distributing at least 30% of its net profit after tax.
Key risks include (i) Supply chain disruptions - Potential shortages of raw materials. (ii) Foreign currency risk - Exposure to USD-denominated raw material purchases and (iii) Demand slowdown - High inflationary pressures may prompt consumers to switch to more affordable brands.
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