BCM ALLIANCE: (BCM MK, CP: MYR0.23, Not Rated) Venture into health food and supplements
Maybank IB Retail Research

BCM proposed to subscribe a 60% stake in Foodict Maker S/B, a company involves in the sale and distribution of health food and supplements, hair and body care products in Malaysia, for MYR2.28m cash or MYR3.80/sh, to be funded via internally generated funds. The proposed subscription is expected to be completed by end-Mar 2021.

This is another effort by management to widen its income base. However, investors should take note that there is no financial information provided in the announcement. The new venture could complement its existing businesses of Commercial Laundry Equipment, Medical Devices and Healthcare Products, which accounted for 36%/45%/18% of FY20 revenue respectively.

Still, the key catalyst to share price performance will likely be the agreement to supply a total of 10m units of SARS-CoV-2 Antigen Rapid Test Kit to MTPS Innotech (Thailand) Co. Ltd which is worth USD80m (approximately MYR320m) – currently pending product registration. YTD, its share price has fallen by about 25%.

So far, no broker covers the stock, likely due to the declining profits since 2018. Valuation wise, the stock is trading at 50x trailing FY20 EPS of 0.46sen, way above its 3-year historical average P/E of 16.5x. A silver lining here is that BCM is sitting on a net cash of MYR38.8m at end-Dec 2020, about 30% of its market capitalisation.
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