KUALA LUMPUR (Dec 23): Southern Score Builders Bhd's (KL:SSB8) proposed acquisition of Nova Pharma Solutions (NPS) is expected to lift group earnings, citing the deal’s attractive valuation and earnings accretion.
Analysts estimate the acquisition could lift Southern Score’s profit attributable to shareholders in the next three and a half years, depending on the final shareholding following the mandatory takeover offer.
TA Securities said the acquisition to be value-accretive, given a 12.8 times annualised price-earnings multiple, based on RM15 million cumulative profit guarantee across the three financial years.
Furthermore, there is an implied equity valuation of RM55.1 million derived from the RM18.2 million consideration for a 33% stake.
"Assuming the profit guarantee is met and NPS contributes average core net earnings of RM1.4 million per annum over FY2026-28, we estimate the acquisition would enhance Southern Score’s earnings by 2.8% in FY2026, 1.4% in FY2027 and 1.2% in FY2028," it added. Southern Score's financial year ends on June 30.
Beyond the near-term uplift, the deal is seen as strategically positive, as Nova Pharma’s specialised pharmaceutical and biotechnology engineering capabilities would allow Southern Score to access higher-margin, regulated projects.
“The combination 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,” TA securities added.
The research firm further said that the execution risk is low as the takeover offer is unconditional and Southern Score, together with parties acting in concert, already controls more than 50% of Nova Pharma’s voting shares.
Separately, Phillip Research said Southern Score’s outstanding order book stood at RM1.6 billion, equivalent to 7.2 times FY2025 revenue, supported by sustained momentum in data centre projects, which make up about 19% of the group’s order book.
Phillip Research maintained its 'buy' call on the stock with a target price of 75 sen, while TA Securities reiterated its 'buy' recommendation and raised its target price slightly to 81 sen following the earnings revisions.