KUALA LUMPUR: Pecca Group Bhd is expected to get an earnings boost of more than 30% for its financial year ending June 30, 2022, following its acquisition of Rentas Health Sdn Bhd for RM100mil.
Analysts said Pecca’s diversification into medical equipment will help provide additional revenue streams for the automotive leather seat interior manufacturer.
TA Securities said its back-of-the-envelope calculation reveals that the acquisition may increase Pecca’s 2022 earnings by 34.3% with a profit guarantee of RM23mil, after considering the increase in interest cost for the acquisition.
“While the acquisition will help to enable Pecca to extend its product range and provide an additional revenue stream to the group, the profit guarantee of merely one year and no proven operating track record (commenced on March 20, 2020) from the company may expose Pecca to some business risks,” it said in a report yesterday.
Meanwhile, AmInvestment Bank said the acquisition would enhance Pecca’s financial year 2022 earnings per share by about 40%, underpinned by Rentas Health’s additional business that would come from the distribution and selling of medical and personal protective equipment.
“Hence, we are positive on this deal,” it said
“Our estimates reflect the full dilution from the enlarged share base of 195 million shares from the deal and an additional RM11.7mil contribution at the profit after tax after minority interest level from the acquisition of Rentas Health.”
Following the acquisition, the research firm said Pecca’s net cash position will drop to RM18.5mil from RM68.5mil as at March 31, 2021. “This translates to about 10 sen per share. Post-acquisition, our fair value shall increase to RM2.87 per share from RM1.99 per share currently.
“The basis of our potential revised fair value is an additional RM11.7mil on the net level from the healthcare business.
“We will not be factoring in these additional profits and potential fair value pending completion of the deal,” said the research house.
Pecca announced on Monday that it will be acquiring a 51% stake in Rentas Health.
Upon completion of the acquisition, Rentas Health will become a 51%-owned subsidiary of Pecca.
The acquisition will be satisfied through a combination of cash and issuance of new ordinary shares in Pecca to the vendor Teoh Zi Yuen.