KUALA LUMPUR (July 19): Kenanga Research has initiate coverage of Nova Wellness Group Bhd at 84 sen with an "outperform" call and target price (TP) of RM1.09 based on 15 times CY23E EPS.
In a note on Tuesday (July 19), the research house said it likes Nova for its: i) integrated business model which encompasses the entire spectrum of the pharmaceutical value chain covering product conceptualisation starting from R&D and downstream to manufacturing and sales; ii) superior margins due to its original business manufacturing (OBM) business model; and iii) earnings growth driven by capacity expansion, a widening distribution network and penetration into local public hospitals.
Kenanga said the stage is set for an explosive growth for Nova over the next three years.
“Amplifying the growth potential is the surge in demand for health supplement products, as consumers take a more proactive stance towards their health and well-being, especially following the Covid-19 pandemic. As an indication, the group saw doubling of distributors to 900+ with target to increase this to 1,200 by FY25.
“In tandem with the increase in distributors, average transaction by consumers has risen 60% since FY20.
“The group has over the past 12 months started penetrating into the local public hospitals. Nova is looking to include more hospitals, which presently account for less than 5% of revenue for its nutritional products,”it said.
Source: TheEdge - 20 Jul 2022
