KUALA LUMPUR (Aug 3): Car-upholstery specialist Pecca Group Bhd’s share price pared gains after surging as much as 36 sen or 8.7% to RM4.50 in Bursa Malaysia morning trade today following the company's announcement yesterday of its proposed acquisition of a 51% stake in healthcare product distributor Rentas Health Sdn Bhd as part of Pecca’s planned diversification.
At 11.22am, Pecca had pared gains at RM4.18 after trading between RM4.17 and RM4.50 so far today.
The company's share trade resumed today following a suspension yesterday in conjunction with the announcement of the RM100 million cash and share transaction.
Yesterday, Pecca told Bursa that it had proposed to acquire 204,000 shares representing a 51% stake in Rentas Health from Teoh Zi Yuen for RM100 million.
Zi Yuen is Pecca group managing director Datuk Teoh Hwa Cheng’s daughter, according to Pecca.
"The purchase consideration shall be satisfied via a combination of RM50 million in cash and issuance of 11.99 million new Pecca shares at an issue price of RM4.17 per Pecca share,” the company added.
AmInvestment Bank Bhd analyst Jeremie Yap wrote in a note today that based on AmInvestment's estimates, the acquisition will enhance Pecca’s earnings per share (EPS) for the financial year ending June 30, 2022 (FY22) by about 40%, underpinned by Rentas’ additional business which will come from the distribution and selling of personal protective equipment (PPE) and medical equipment.
"Hence, we are positive on this deal,” said Yap, who raised AmInvestment's fair value (FV) for Pecca shares to RM2.87 from RM1.99.
He, however, maintained the research house's "underweight" call on Pecca shares, the valuations of which "are unattractive and have gone way ahead of fundamentals at 34-33 times FY21-22F earnings”.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) analyst Daniel Wong in a note today maintained HLIB's "sell" call for Pecca shares, with an unchanged target price (TP) of RM2.
He said that while HLIB is positive on Pecca’s leverage on a strong rebound in the automotive sector’s total industry volume (TIV) during Malaysia’s sales and service tax exemption period besides the company's new PPE venture, "we believe its current share price has overshot the group’s earnings fundamentals”.
At the RM4.50 intraday-high share price so far today, the company had a market value of RM846 million based on its 188 million issued shares.
Pecca’s share price had risen to current levels from the closing price of RM1.64 on Jan 4, 2021.