PETALING JAYA: Mega First Corp Bhd
’s (MFCB) venture into fruit and vegetable farming is not expected to contribute significantly to its earnings.
The group, which is involved in the power, resources, and property segments, said on Wednesday that it intends to acquire a 64% stake in plantation firm, CSC Agriculture Holdings Sdn Bhd (CSCAH), for RM25mil.
CSC Group is involved in the plantation and wholesaling of fruits and vegetables using innovative farming techniques and automated planting processes.
AmInvestment Bank Research (AmInvest Reasearch) said it is neutral on the development.
“Earnings contribution from the fruit and vegetable venture is not expected to be significant.
“MFCB’s earnings are mainly driven by the Don Sahong Hydropower Plant in Laos, which accounted for 88% of group earnings before interest and taxes in financial year 2023 (FY23),” the research firm said in a note to clients.
The earnings and net book value of CSCAH were not disclosed.
“The purchase consideration of RM25mil for a 64% stake values CSCAH at RM39.1mil.
“Assuming an earnings yield of 10%, CSCAH will improve MFCB’s net profit by less than 3%,” said AmInvest Reasearch.
It said the stock is currently trading at a decent FY25F price-earnings of nine times, which is below its five-year average of 10 times.
“We maintain ‘buy’ on MFCB with an unchanged fair value of RM5.40 a share, based on a FY25F price-earnings of 10 times.”
