A Taste of Facts: Could Sunzen Biotech’s Aggressive Acquisition Spree Lead to Significant Growth?

Sunzen Biotech Bhd (BURSA: SUNZEN) has been busy shaking up its portfolio and adding new ventures, aiming to accelerate its growth and offer more value to its shareholders. Let’s take a closer look at what Sunzen has been up to and why recent moves are creating a buzz in the market.

The company, which primarily operates in the human health supplement space, has made a number of strategic acquisitions that set the stage for its future ambitions. Last year, Sunzen acquired the remaining 30% stakes in Ecolite Biotech Manufacturing Sdn Bhd and Yanming Resources Sdn Bhd, giving it full control over these companies. This acquisition wasn’t just about ownership; it came with profit guarantees — Ecolite Biotech is guaranteeing RM10 million in profit over two years, while Yanming Resources is expected to bring in RM3 million in profit during the same period. Such financial assurances boost confidence in Sunzen’s growth prospects.

In their latest move, Sunzen is venturing into the ophthalmic products market. The company recently acquired a 70% stake in Eye Nation Medical Sdn Bhd, a business focused on ophthalmic products. This deal, valued at RM6.37 million, comes with a profit guarantee of RM2.6 million for the financial years starting July 2024 to June 2026. This acquisition aims to strengthen Sunzen’s footprint in healthcare while providing a new revenue stream that diversifies its offerings.

Looking forward, Sunzen recently announced that it has identified yet another acquisition target. This time, the target company is within the finance industry, a move that could further boost its capabilities in SME financing. According to Sunzen Executive Chairman Ching Chee Pun, the deal could be finalised as early as next year. This acquisition would be in line with Sunzen’s strategy to achieve faster growth compared to traditional, organic means.

From a layman investor’s point of view, Sunzen seems to be on an aggressive growth path, actively seeking acquisitions that offer strong synergies with its current operations. These acquisitions provide immediate earnings boosts and set Sunzen on a course for broader market expansion. With the share price standing at 34.5 sen as of 20 November 2024, the company’s market capitalisation is only RM253.4 million. Given the growth potential from its recent and upcoming acquisitions, it looks like there could be plenty of room for the company’s value to rise even further.

Investors have reason to be optimistic — Sunzen’s ability to diversify its business, alongside a healthy cash reserve of RM27.65 million and relatively low debt, provides the foundation to support further acquisitions. Plus, the profit guarantees attached to their recent acquisitions give added confidence that Sunzen can deliver stronger earnings going forward.

For those considering whether Sunzen’s stock is a good buy, the strategy of acquiring high-potential businesses combined with a focused drive towards diversified revenue streams could make it an attractive option for long-term growth. The growth in its share price by 68% over the past year already indicates that the market is recognising this potential, but at a market cap of just RM253.4 million, there may still be considerable upside to come.