PETALING JAYA: UMediC Group Bhd (UMC) is projected to sustain growth in earnings on the back of strong demand for its offerings, along with plans for a new venture.
Hong Leong Investment Bank (HLIB) Research said the medical devices maker’s distribution segment and self-manufactured products are recording healthy levels of growth.
“UMC’s current orderbook stands at about RM10mil, evenly split between both the manufacturing segment as well as the distribution and marketing segment,” said the research house in a report yesterday.
The group saw the rise in demand for automated external defibrillators (AED), following the government’s mandate for the on-site installation of AED in all public facilities.
“We note that UMC has a market share of about 30% for its distribution business which is limited to the existing category of medical devices that UMC supplies.
“Hence, this new requirement by the government will undoubtedly benefit UMC,” said HLIB Research.
Moreover, UMC’s recently commercialised second own-brand product, the AirdroX spacer, generated RM0.36mil of revenue within a month.
At present, the group is supplying the spacer to both hospitals and local pharmacies at an average asking price of roughly RM30 per unit.
“Given the manufacturing of AirdroX spacer’s components is outsourced to third party contract manufacturers while assembly is done in-house, we believe it would be relatively easier to ramp up the production of the product,” said HLIB Research.
Overall, the research house noted it is likely for UMC to have further market share growth as certain products under the group’s portfolio are relatively new.
Moving forward, the group has plans to venture into the laboratory supply business to supply laboratory equipment and consumables.
For starters, UMC will be distributing laboratory equipment for prospective principals before looking into the manufacturing of water-based and chemical-based consumables. The research house is of the view that the latter is expected to provide recurring income for the group.
“UMC has initiated discussion with targeted principals and is currently in the due diligence stage.
“The management also does not expect this new venture to require heavy capital expenditure, as the group can leverage on its existing facilities for the manufacturing of lab consumables,” said HLIB Research.
HLIB Research maintained its “hold” rating on UMC with an unchanged target price of RM0.81.
The valuation is based on a price to earnings ratio of 21.6 times with a earnings per share forecast of 3.7 sen per share.
