PETALING JAYA: A potential new manufacturing space that is being acquired by Coraza Integrated Technology Bhd
may help improve its margins in the future with better efficiencies.
According to TA Research, the company could also be poised for a rebound once the tide in the semiconductor industry turns.
“We like Coraza for its earnings growth prospects, backed by its expansion plans, exposure to high-growth industries, including semiconductors and instrumentation, and established relationships with multinational corporations,” it said.
Coraza announced recently that it will be acquiring a ready-built factory situated on a piece of freehold industrial land in Nibong Tebal, Penang, for RM17.7mil.
“We view the acquisition positively, as it will allow Coraza to capture opportunities and meet the demands of new projects. If we assume that the factory has a built-up area of 52,000 sq ft, it is estimated to enlarge Coraza’s total manufacturing floor space by 52.5%,” TA Research said.
It was noted that the acquisition price of RM192 per sq ft (psf) is comparable to properties in the vicinity on a similar scale.
“No valuation was carried out for this acquisition, with the property’s purchase price arrived at on a willing-buyer, willing-seller basis,” TA Research said.
“We gather from the property portals that the purchase price of RM192 psf is comparable to properties in the vicinity of a similar scale with an asking price of RM209 psf.”
Should the acquisition be fully funded with borrowings, TA Research said it estimates Coraza to turn from a net cash situation to a net debt situation at a net gearing of 0.1 times.
“We estimate associated interest expenses to dilute our forecast for the financial year 2024 (FY24) or FY25 earnings by less than 3%. We maintain our earnings forecasts pending the completion of the acquisition,” TA Research said.
It maintained its “buy” recommendation on the counter with a target price of 86.5 sen, based on 22 times 2024 forecast earnings per share.
