PETALING JAYA: Nationgate Holdings Bhd
’s earnings prospects are approaching a key inflection point backed by execution visibility and the company’s optical networking business.
Kenanga Research said since securing two new US optical networking customers in the fourth quarter of financial year 2025 (4Q25), the company has progressed through new product introduction and small-volume production, with dedicated capacity now nearing completion and equipment fit-out underway.
“Initial commercial production is targeted from 4Q26, followed by a meaningful volume ramp through FY27, marking the transition from qualification to earnings delivery,” the research house said.
“Potential US restrictions on Chinese optical transceivers provide an increasingly favourable backdrop for Nationgate as a manufacturing partner to the US optical supply chain. While our thesis is not dependent on the proposal being implemented, we see it as an additional tailwind.
“With earnings now within sight and the industry backdrop turning more favourable, we believe the timing is right to turn more constructive,” it added.
It believes the company has strengthened both execution visibility and also the move up the optical value chain, with capacity being built and equipped for the newly secured programmes, providing greater confidence in customer demand visibility ahead of commercial production.
“Nationgate’s manufacturing scope has expanded beyond conventional SMT and final assembly into chip-on-chip/chip-on-substrate packaging, transmitter optical sub-assembly/receiver optical sub-assembly/transmitter-receiver optical sub-assembly assembly, fibre attachment, active alignment, burn-in and optical testing,” it said.
“Higher-complexity processes sit closer to the optical engine and deepen Nationgate’s integration with customers.
“We believe this increasingly positions Nationgate alongside specialised optical manufacturing peers such as Fabrinet, Jabil and Suzhou TFC, with higher manufacturing content and greater customer stickiness as volumes scale,” it added.
The current market capitalisation of about RM3.5bil, Nationgate’s existing businesses support about RM2.38bil of equity value (comprising about RM76mil profit after tax or PAT from its CPU and other businesses valued at 12 times price-to-earnings ratio or PE and about RM50mil PAT from its existing networking business at 25 times PE), leaving only about RM1.12bil implicitly attributed to its new optical networking programmes.
Kenanga Research has an “outperform” call for Nationgate with a target price of RM2.14, implying 43% upside.
