By MARK RAO / Graphic By TMR
Nova Wellness Group Bhd’s growth plans via its in-house research and development (R&D) centre and capacity expansion plans are viewed positively with the initial public offering (IPO) given a fair value of 61 sen a share by Inter-Pacific Research Sdn Bhd.
The research firm noted its valuation — a 10.9% premium to the company’s IPO offer price of 55 sen — is based on financial year 2019 (FY19) forecast earnings per share of 4.7 sen pegged to 13 times priceearnings ratio.
“The nutraceutical industry in Malaysia is forecast to grow with the backing of the increase in awareness and demand for preventive healthcare,” Inter-Pacific noted in a report yesterday.
“In addition, Nova Wellness is also looking to expand its presence in the skincare products segment.”
Nova Wellness, which is scheduled to be listed on July 20 on the ACE Market, is a nutraceutical and skincare goods developer and retailer who is also engaged as an original equipment manufacturer service provider for dietary supplements and functional food products.
Inter-Pacific stated Nova Wellness’ in-house R&D facility in Sepang provides the group with the platform to expand its product range and improve on its existing products to meet market demand and customer requirements.
“The group’s own production facility enables it to produce a range of nutraceutical products under their own house-brands and conform to the standards required by relevant authorities,” it said.
This includes Good Manufacturing Practice (GMP)-compliance and halal certification, while the in-house production facility allows the group to control the entire production process to minimise unplanned interruptions.
Nova Wellness plans to increase its production capacity for functional food and skincare products by acquiring new machinery with the IPO proceeds.
The company intends to raise RM44.91 million from the issuance of 81.66 million new IPO shares, with 36.7% from the proceeds earmarked for the construction of the new GMP-compliant production facility and 25.8% allocated for R&D activities.
To date, Nova Wellness has developed 49 dietary supplements, 11 functional food products and 28 skincare products for both domestic and international markets.
Inter-Pacific said the company’s wide distribution network across Malaysia for house-brand products bodes well for the group’s competitiveness.
“The group will thus be able to keep its competitiveness — especially vis-à-vis larger competitors who have a presence in the international market,” it said.
There are reportedly 227 independent retail pharmacies in Malaysia that sells Nova Wellness’ house-brand products, of which 105 are Nova Wellness Partnership Programme (NWPP) partners.
Nova Wellness’ proposed 30% dividend payout policy of annual audited profit, coupled with an experienced management team, is a further upside, according to Inter-Pacific.
The investment risks faced by the company include dependency on major customers and NWPP partners, as well as risks stemming from unsuccessful pre-clinical and clinical trials.
Its top three major customers contributed 10% of the group’s FY17 revenue, while NWPP partners made up 60.4% of group revenue that same year.
On another note, unsuccessful trials of products will negatively affect the group’s competitiveness.