FOREWORD
KARYON, a stock that caught our interest, is performing.
https://klse.i3investor.com/blogs/jomnterry/2020-08-06-story-h1511560638-KARYON_STRONG_DEMAND_PRODUCTS_MARKETS_QUALIFIED_FOR_EXPANSION.jsp
Coming up next, we believe, could be SUNZEN. We believe its potential upside of 100% has been overlooked by the market.
JOIN US FOR STOCK INSIGHTS
https://t.me/jomnterry
SUNZEN
A CHARMING HEALTHCARE DARK HORSE WITH A POTENTIAL 100% UPSIDE
-
SAFEGUARDING ANIMAL HEALTH & HUMAN HEALTH - NOWING STEPPING UP THE HUMAN HEALTH GAME
-
OWN-RESEARCHED, OWN-MANUFACTURED & OWN-BRAND TRADITIONAL CHINESE MEDICINE (TCM) PRODUCTS
-
SEIZING THE USD 32 BILLION, GROWING TCM MARKET WITH EARLY YET PROMISING SUCCESS
-
TRUSTED BY KEY INTERNATIONAL MARKETS, SUPPORTED BY GLOBAL DISTRIBUTION NETWORK
-
AGGRESIVE RAMP UP OF PRODUCTION TO CATER TO KEY EXPORT MARKETS
-
POTENTIALLY INCREASED DEMAND ON POULTRY & FARMING DISINFECTANT
- 100% UPSIDE BASED ON A CONSERVATIVE, BELOW-AVERAGE SHARE PRICE/NTA MULTIPLE (UNDER BENCHMARK WITH ITS CLOSEST PEERS)
SAFEGUARDING ANIMAL HEALTH & HUMAN HEALTH, AND STEPPING UP THE HUMAN HEALTH GAME
Sunzen Biotech Berhad (“Sunzen Group”) is a conglomerate company specialized in animal health with the focus of developing, manufacturing and marketing animal health care products. They also develop and manufacture non-antibiotic animal health products that comply with international safety standards to ensure public safety. And in recognition of our focused Research and Development in non-antibiotic animal biotechnology, Sunzen Group has been accorded BioNexus Status, which entitles Sunzen to tax incentives and other privileges specified under the BioNexus bill of guarantees, from the Malaysian Biotechnology Corporation.
In year 2018, Sunzen successful acquire Ecolite Biotech Manufacturing Sdn Bhd to diversify into the human health products. Ecolite is a health and wellness company that are highly dedicated to develop herbal nourishments inspired by nature and the healing wonders of herbs. Ranging from bird’s nest, The Joy of Life collagen drink, Pu Yao Jing tonic, essence of chicken, essence of fish, Pi Pa Gao cough syrup, Bai Foong Wan, food supplements, dried herbs and more. Even though Sunzen's Human Health segment has not really performed since 2018, a strong business trajectory could take place in 2020 and beyond.
OWN-RESEARCHED, OWN-MANUFACTURED & OWN-BRAND TCM PRODUCTS
Sunzen manufactures, distributes and trades Human Health products and Animal Health Products to local and international markets. Their Human Health segment, which started in 2018, sells their own-researched, own-manufactured and own-brand health tonnic, essence, bird's nests, honey & vinega, digestion-promoting food and family health supplements. These products fetch good market value due to Sunzen's strong brand, Ecolite and strong demand from consumers due to the skyrocketing health awareness amongst the rampage of COVID-19. . Sunzen's manufacturing processes are carried out within their own manufacturing facility that is fully-compliant with GMP, HACCP, MeSTI, VHM and Halal certification.
SEIZING THE USD 32 BILLION, GROWING TCM MARKET WITH EARLY YET PROMISING SUCCESS (3 AUG 2020)
Source: The Star
The traditional Chinese medicine (TCM) market is worth RM32bil. On 3 August 2020, Sunzen's Managing Director, Mr. Teo Yek Ming stated Sunzen is striving to capture a meaningful part of it through two ways. The first way is the strategic leverage of digital branding, digital marketing and E-Commerce to capture the young generation and the large non-Chinese customer segments. Sunzen's efforts which has shown early yet promising success, as stated by the managing director himself confidently on The Star interview.
TRUSTED BY KEY INTERNATIONAL MARKETS, SUPPORTED BY GLOBAL DISTRIBUTION NETWORK
Complying stringent international standards, Sunzen's products have earned trust from strong-demand, high-standard key international markets, including China, America, Canada, Germany, Japan, Korea, Taiwan, Singapore, Thailand and others. Their distribution network consists of popular pharmacy, chain store and own retail outlets in those countries.
AGGRESIVE RAMP UP OF PRODUCTION TO CATER TO KEY EXPORT MARKETS
Sunzen is also aggressively ramping up its production to cater to key export markets. As of August 2020, Sunzen’s overall export revenue is at 46% of the group’s total revenue. Sunzen plans to increase it to 70% within three years. At a current ratio of 4.42 times, Sunzen is well-positioned to capture the traditional Chinese medicine market without without compromising its short term financial obligations.
POTENTIALLY INCREASED DEMAND ON POULTRY & FARMING DISINFECTANT
Sunzen also sells detergent and disinfectant that can be used at poultry and farming facilities. To combat the spread of COVID-19 and other germs, bacteria and viruses as well as fulfilling the latest public health regulations, Sunzen may receive increased orders from poultry and farming organisations, locally and internationally.
SUNZEN'S BUSINESS RISKS
Sunzen may not grow their business consistently. Sunzen may operate less efficiently than expected, thereby eroding profit margins. Having presence across international markets, Sunzen may experience forex fluctuations.
100% UPSIDE BASED ON A CONSERVATIVE, BELOW-AVERAGE VALUATION (UNDER BENCHMARK WITH ITS CLOSEST PEERS)
Underpinned by effective growth strategies under the right market at the right timing, Sunzen's Human Health business segment seems to have bright prospects.
As of 7 August 2020, Sunzen's share is only trading at 18 sen, which is only 1.06 times than its NTA (Net Tangible Assets of 17 sen. In other words, despite having own research capabilities, own brand products, global distribution networks, effective growth strategies and aggresive production capacity ramp up, the market is valuing Sunzen's Intangible Assets at only 1 sen (18 sen minus 17 sen).
On the other hand, Nova, Dpharma, Pharma, Dpharma and Kotra who are involved in the manufacture and trading of healthcare products (the closest peers available), are currently trading at valuations of at least 2.62 times above their NTAs, whereas Sunzen is only trading at 1.06 times above its NTA.
| Company | Share Price | NTA | Share Price/NTA Multiple |
| Nova | RM1.18 | RM0.26 | 4.54x |
| Dpharma | RM2.88 | RM0.79 | 3.64x |
| Pharma | RM4.45 | RM1.34 | 3.32x |
| Kotra | RM3.27 | RM1.25 | 2.62x |
| Sunzen | RM0.18 | RM0.17 | 1.06x |
By pegging a conversative, below-average Share Price/NTA multiple of 2 times under benchmark with its closest peers, Sunzen's share price is worth 34 sen. At a share price of RM0.17, this represents an almost 100% upside. Based on this valuation metric, Sunzen's upside seems to have been overlooked by the market.
DISCLAIMER
The article is for sharing purpose only. There is no buy/sell recommendation.
https://t.me/jomnterry
https://klse.i3investor.com/blogs/jomnterry/2020-08-08-story-h1511590275-SUNZEN_A_CHARMING_HEALTHCARE_DARK_HORSE_WITH_A_POTENTIAL_100_UPSIDE.jsp
