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Singapore Investment


 NATGATE 0270 NATIONGATE HOLDINGS BERHAD shares soar 113% on ACE Market debut

KUALA LUMPUR: Electronics manufacturing services (EMS) provider NationGate Holdings Bhd made its debut on the ACE Market at 81 sen a share, which represented a whopping 113% jump over its initial public offering (IPO) price of 38 sen a share.

A total of 65.8 million shares were traded at the opening bell.

The company, which successfully raised RM165.5mil via an issuance of 435.5 million new IPO shares, said it will be utilising the bulk of the proceeds for working capital and repaying bank borrowings.

RM5.9mil or 3.6% will be used to purchase additional machinery and equipment to expand its “surface mount technology” (SMT) assembly capacity and enhance its production efficiency.

Upon its listing, NationGate had a market capitalisation of RM788.1mil based on an enlarged share capital of 2.1 billion shares, making it the largest listing on the ACE Market.

Kenanga Research, which initiated coverage on the stock with an "outperform" recommendation and target price of 85 sen, expects NationGate to buck the slowdown in the tech space to record strong earnings growth for FY23 and FY24.

"Various products are moving into the mass production stage starting this year until 2024 after going through qualification for the past two years.

"With the capacity and headcount that have already been accounted for, the increase in revenue is expected to contribute significantly to its bottom line," said the research firm in a note.

It said the lion's share of NationGate's revenue stems from high-growth idustries such as networking, telecommunication, supercomputers, industrial instruments and automotive, while consumer electronics only make up less than 1% of group revenue.

"With c.70% of its revenue coming from networking and telecommunication, the group is sanguine on higher orders backed by robust forecasts from key customers for optical transceivers as data centres are seeing the need to upgrade to 400G and 800G transceivers in order to cope with the higher bandwidth requirements.

"In addition, there will be a trickle-down effect for edge data centres to adopt 100G transceivers, bringing low-latency experiences closer to end-users," said Kenanga.

The research firm also noted that NationGate differentiates itself from traditional EMS players by incorporating ViTrox's V-ONE smart manufacturing platform to ensure its facilities are industrial 4.0 ready.

The group also offers value-added services such as chip-on-board (die attach, wire bonding and encapsulation) processes which are typically seen only among OSAT players, it said.

In a statement released in conjunction with the group's listing, NationGate said it had unbilled purchase orders of RM369.5mil as at Nov 14, 2022, which are to be billed upon delivery progressively over the next 12 months.

For the third quarter ended Sept 30, 2022,the group posted a net profit of RM30.1mil on revenue of RM305.2mil.

In the cumulative nine months ended Sept 30, 2022, the group posted a net profit of RM63.4mil on revenue of RM731.2mil.


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