UMC 0256 UMEDIC GROUP BERHAD's earnings to grow more than 31pct in FY22, says HLIB
HLIB is projecting for UMC's earnings to grow by 31.7 per cent in the financial year 2022 (FY22), 41 per cent for FY23 and 18.1 per cent for FY24, far exceeding the 12.1 per cent compound annual growth rate (CAGR) projected by Protégé for the local medi
KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research has initiated coverage on UmediC Group Bhd (UMC), which is listed today at an initial public offering (IPO) price of 32 sen, with a "Buy" rating and target price (TP) of 61 sen.
HLIB is projecting for UMC's earnings to grow by 31.7 per cent in the financial year 2022 (FY22), 41 per cent for FY23 and 18.1 per cent for FY24.
This is far exceeding the 12.1 per cent compound annual growth rate (CAGR) projected by Protégé for the local medical device industry.
"This will be due to stronger revenue contributions from both segments, huge room for market share improvement as UMC accounts for a mere 0.2 per cent share of the total medical device industry in Malaysia and stronger contribution from its manufacturing segment that fetches higher margins.
"We value UMC based on a price-earnings (PE) multiple of 18x, in line with the peer average which consists of both local and international medical device manufacturers and distributors.
"While we acknowledge that UMC's market capitalisation is considerably smaller, we deem the valuation justifiable as we believe this is being compensated by the stronger earnings growth expected," it said in a note today.
HLIB said Protégé projected the medical device industry in Malaysia to grow at a five-year CAGR of 12.1 per cent, to a market size of RM21.41 billion by 2026.
"This will be supported by pent-up demand for healthcare services locally; as well as government shifting its focus to improving the country's public healthcare system post-pandemic.
"Increased demand for healthcare services would result in higher usage of medical consumables and also potentially speeding up the replacement cycle of medical equipment, both of which presents an opportunity to UMC," it said.
Meanwhile, HLIB said UMC was targeting to expand its manufacturing division by developing and commercialising more own-branded products, tapping on its research and development (R&D) capabilities.
As of current, it said UMC had identified several new products to be commercialised in the coming two years.
"These include sterile water for inhalation, pre-filled nebulisers, digital oxygen flowmeters and humidifier humidity sensors.
"At the same time, UMC is also looking to source more innovative medical devices from existing suppliers and principals, as well as developing a new brand distribution business.
"An extensive amount of time required to bring a product to the market and stringent selection process by the principals and suppliers would serve as a natural barrier to entry, in our opinion," it said.