NationGate acquisitions set to spearhead growth

UOBKH Research said the initiatives are set to drive growth beyond the company’s organic targets.

PETALING JAYA: Nationgate Holdings Bhd’s new customer acquisitions and business collaborations via joint ventures are expected to spearhead growth for the group.

UOB Kay Hian (UOBKH) Research said that these initiatives are set to drive growth beyond the company’s organic targets.

“Beyond the ramp-up from a low base in 2023, NationGate is also spearheading growth via new customer acquisitions and business collaborations, which could require new premises to house these trade diversion-related opportunities.

“We believe this could come from the consumer electronics segment, via active collaboration with GoldTek Technology, the semiconductor segment – assembly and testing services – computing power infrastructure and server space,” UOBKH Research said in a report yesterday.

The research house noted that NationGate had recently acquired 100% equity in Hesechan Industries Sdn Bhd, which comes with a 272,900-square-foot land area, to supplement its expansion plan.

“Should these prospects crystalise, this could supersede the group’s targeted net profit growth of more than 30% beyond 2024.”

Additionally, UOBKH Research said NationGate has been appointed an original equipment manufacturer for artificial intelligence computing.

“While earnings contribution from this segment is still meagre, the development provides a new platform for the group to ride on the booming demand for AI and trade diversion opportunities.

“Meanwhile, there is significant potential for increased earnings through deeper engagement in advanced process manufacturing.”

On the corporate front, UOBKH Research said NationGate has also proposed the transfer of its listing from the ACE Market to the Main Market of Bursa Malaysia via the accelerated transfer process by the Securities Commission Malaysia.

This is expected to be completed in the first half of 2024.

UOBKH Research added that since the United States-China trade war started in 2019, NationGate has benefited immensely from the trade diversion, with a three-year revenue/core net profit compounded annual growth rate of 43% and 153%.

“The proportion grew to 55% to 70% of total revenue currently after the group expanded its electronic manufacturing services further into the networking and telecom segments. This was achieved by providing assembly and testing services.

“After the commencement of the new operations at Plant 7, the group is expanding Plant 5 by an additional 80,000 sq ft while adding its new Plant 8, which has an area of 248,000 sq ft, for a 53% floor space expansion.

“Several multinational corporations have expressed interest in taking up the facilities.”

UOBKH Research also said NationGate should benefit from its existing customers’ supply chain reconfiguration.

“The company also intends to ride on its new business collaboration with GoldTek to further expand its business and strengthen the relationship between both parties for future collaborations with more affiliates and/or subsidiaries of Hon Hai Precision Industry.

“NationGate commenced operations at Plant 7 for a few customers with an initial built-up area of 100,000 sq ft, with eight surface mounting technology lines, in February 2022, and expanded its manufacturing floor space within Plant 7 for a total rented built-up area of 227,700 sq ft.”

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