KUALA LUMPUR: Shares in Pecca Group Bhd were lower in early trade Wednesday as investors take profit after recent gains.
The manufacturer of automotive leather seat interior fell 2.65%, or 11 sen to RM4.04, making it one of the top losers on Bursa Malaysia. It has appreciated a whopping 160% so far this year.
Early this week, Pecca has proposed a diversification of its business to include healthcare and intends to acquire a 51% stake in Rentas Health Sdn Bhd for RM100mil.
The acquisition will be satisfied via RM50 million in cash and the issuance of 11.99 million new shares in Pecca at an issue price of RM4.17 per share.
The price-to-earnings of the acquisition is 8.53 times based on the profit guarantee and 51% stake to be acquired by Pecca.
AmInvestment Bank Bhd has maintained “underweight” on Pecca with an unchanged fair value (FV) of RM1.99 per share based on sum-of-parts (SOP) valuation. No ESG-related adjustments to its FV.
“Based on the FY22F profit guarantee of RM11.7mil from Rentas Health (for a 51% equity stake), the price tag of RM100.0mil effectively values the acquisition of Rentas Health at about FY22F P/E of 8.5x, which we see as reasonable,” it said.
“Based on our estimates, the acquisition would enhance Pecca’s FY22F EPS by about 40% underpinned by Rentas’s additional business which would come from the distribution and selling of PPE and medical equipment. Hence, we are positive on this deal,” the research house said.