PETALING JAYA: Analysts view construction company Southern Score Builders Bhd’s investment in Nova Pharma Solutions Bhd (NPS) positively, as it represents a strategic move to strengthen the group’s positioning across the construction value chain and enhance its competitiveness in higher value-added segments.
Southern Score recently announced that its wholly owned subsidiary had entered into an unconditional share sale agreement with Khoo Boo Wie, a major shareholder and executive director of NPS to acquire 33% equity interest in NPS for a total cash consideration of RM18.2mil, or 37 sen per share.
The acquisition is backed by a profit guarantee of at least RM15mil in cumulative net profit over three and a half years, TA Research said.
The research house said NPS’ expertise in specialised engineering solutions for pharmaceutical and biotechnology facilities, particularly at the early design and planning stages, complements Southern Score’s core strengths in construction management, turnkey delivery and mechanical and electrical works.
It said the combination of capabilities is expected to improve end-to-end project execution, reduce delivery and regulatory risks, and enhance bid competitiveness for projects with stringent compliance and validation requirements.
“Importantly, the acquisition also provides Southern Score with access to a new customer base, particularly pharmaceutical and biotechnology players, thereby diversifying its revenue sources and reducing reliance on its traditional property-development segment.”
TA Research said it expects the acquisition to be value accretive based on a compelling 12.8 times annualised price-earnings multiple based on the RM15mil cumulative profit guarantee across three and a half years and an implied equity valuation of RM55.1mil derived from the RM18.2mil consideration for the 33% stake.
“Assuming the profit guarantee is met and NPS contributes average core net earnings of RM1.4mil a year over its financial year ending June 30, 2026 (FY26) to FY28, we estimate the acquisition would enhance Southern Score’s earnings by 2.8% in FY26, 1.4% in FY27 and 1.2% in FY28,” the research house said.
The research house house that the execution risk was low as the takeover offer was unconditional and Southern Score, together with parties acting in concert, already control more than 50% of Nova Pharma’s voting shares.
Following earnings adjustments, the research house raised its target price for the stock marginally to 81 sen. At last look, it was 61 sen.
Meanwhile, Phillip Research said it reiterated its “buy” rating and target price at 75 sen for Southern Score, pegged to a target 18 times price-earnings multiple on FY27 earnings per share.
“We like Southern Score for its strategic expansion into the fast-growing data centre sector, coupled with robust order book visibility from existing anchor clients,” it said.
The research house added that Southern Score’s order book currently stood at RM1.6bil, equivalent to 7.2 times FY25 revenue, supported by sustained momentum in data centre projects, which make up about 19% of the group’s order book.
Key risks to its call include unforeseen changes in government policies and price fluctuations in raw material prices, Phillip Research said.
