KUALA LUMPUR (July 26): UMediC Group Bhd (UMC) opened 56.25% or an impressive 18 sen above its initial public offering (IPO) price of 32 sen, upon its debut on the ACE Market of Bursa Malaysia on Tuesday (July 26).

Shares in the company, which is principally involved in marketing and distribution of various branded medical devices and consumables, then rose further to hit a high of 55 sen before gains were pared. It closed out the day at 44 sen, 12 sen or 37.5% above its IPO price, valuing the medical device manufacturer at RM164.52 million.

A total of 123.5 million shares were traded, making it the one of the most actively traded stock on the local bourse.

UMC raised RM31.11 million from the IPO exercise, and said that of the gross proceeds, RM9 million will be allocated for the repayment of borrowings, and RM8.66 million for working capital to finance the purchase of additional distribution products, including ventilators, defibrillators and infant care machines.

Another RM6.8 million will be allocated for the setting up of new marketing and distribution offices in Kuala Lumpur and Johor Baru, while the remaining RM3.5 million will be used for the construction of a new factory in Batu Kawan.

According to UMC, 80% of the group's revenue came from the distribution of products such as patient monitors, ultrasound machines, ventilators, cardiotocography and electric-powered 3D chest compressors. The other 20% came from its manufactured products, namely the HydroX Prefilled Humidifier and AirdroX Spacer Anti-Static Valved Inhaler Chamber.

Meanwhile, Hong Leong Investment Bank Research initiated coverage of UMC at the IPO price of 32 sen, with a “buy" rating and target price (TP) of 61 sen. It said that a beneficiary of the pandemic, UMC saw its core earnings grow at a compound annual growth rate (CAGR) of 103% from the financial year ended July 31, 2019 (FY19) to FY21, due to a boost in demand for medical devices and consumables.

In a note on Monday, the research house said that going forward, it is projecting for UMC's FY22/23/24 earnings to grow by 31.7%/41%/18.1% respectively, far exceeding the 12.1% CAGR projected by Protégé for the local medical device industry.

“We initiate coverage of UMC, with a 'buy' recommendation and TP of 61 sen, based on a price-earnings multiple of 18 times (in line with its peers' average).

“While we acknowledge that UMC’s market capitalisation is considerably smaller, we deem the valuation justifiable, as we believe this is compensated by the stronger earnings growth expected,” it said.