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Kobay eyes more acquisitions in healthcare sector

Kobay eyes more acquisitions in healthcare sector

04 Aug 2021

Last month, the group received the green light from its shareholders to acquire a 70% stake in Avelon for RM47.7m

Kobay Technology Bhd intends to expand its geographical footprint by venturing into the pharmaceutical and healthcare segment over the next three years.

The plan follows its proposed acquisition of a 70% stake in Avelon Group.

Kobay is looking to enhance its earnings visibility and sustainability by diversifying into the healthcare industry, besides having its current business divisions namely manufacturing and property.

Kobay CEO and MD Datuk Seri Koay Hean Eng said the company wants to focus on its existing business of wholesale and retail sale of pharmaceutical and healthcare products while growing vertically to manufacture health food and supplements.

“We intend to acquire related pharmaceutical and healthcare businesses over the next three years when an opportunity arises.

“We are always on the lookout for opportunities that will add value to our core manufacturing business,” Koay told The Malaysian Reserve in an email recently.

Last month, the group received the green light from its shareholders to acquire a 70% stake in Avelon for RM47.7 million.

According to its exchange filing, Kobay received shareholders’ nod to diversify its core activities and its subsidiaries to include the sale and manufacturing of pharmaceutical and healthcare products.

Avelon Group comprises Avelon Healthcare Sdn Bhd, Galaxis Healthcare Sdn Bhd, Avelon Arise Sdn Bhd, Galaxis Pharma Sdn Bhd and Arise Healthcare Sdn Bhd.

The five entities reported a combined profit after tax (PAT) of RM8.5 million in their financial year ended Dec 31, 2020 (FY20).

The proposed acquisition is expected to be completed in mid-August this year.

Koay noted that the acquisition comes with an aggregate profit guarantee of RM25.5 million PAT for three years (FY20-FY23), or an average of RM8.5 million per year.

“Looking ahead, we continue to expect healthy organic growth in the pharmaceutical and healthcare segment, underpinned by the increase in awareness for health and wellness and the ageing population of the country.

“This division will also look into both horizontal and vertical acquisitions when opportunities arise. As such, the new healthcare segment will be one of the key contributors to Kobay’s earnings moving forward,” he said.

Although the group is involved in the supply of products relating to the pandemic such as test kits for the private sector, Koay said its diversification does not include the supply of vaccines.

On the property division, Koay said the pandemic had severely affected the property market and the sentiment remained weak.

Kobay is taking a cautious approach by focusing on a single project at one time.

Currently, the group is working on Phase 2 of the Lavanya Residence project in Langkawi, Kedah.

It is also shifting its business strategy to pivot towards digital marketing as a means to boost sales.

“As announced by our government officials, Malaysia currently has one of the fastest vaccination rates in the world. Therefore, we have high hopes that the economy will gradually reopen soon with robust recovery on the horizon.

“Following that, we expect the property market to bounce back strongly as and when the pandemic is under control. Other positive catalysts are already in place for the property sector, such as the prevailing low interest-rate environment, initiatives and incentives by the government to stimulate demand in the property market, as well as attractive deals put up by property developers, including us,” he added.

For its third quarter ended March 31, 2021, the group recorded a net profit of RM7.07 million, up by 9.6% year-on-year (YoY) from RM6.45 million in the corresponding quarter last year.

Revenue dropped 26.8% YoY to RM35.22 million in the quarter compared to RM48.09 million in 3Q20, mainly attributed to lower contribution across the divisions.

Its manufacturing division reported a revenue of RM32.2 million, down by 24% from a year prior, due to drop in orders from aerospace and oil and gas industries.

The Conditional Movement Control Order affected the performance of its property division, which saw a drop in revenue by 51.8%.

Source: The Malaysian Reserve

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