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Cengild may see a boost in share price after trading sideways since its listing
Cengild Medical Bhd is probably on theworst performing healthcare listed on Bursa Malaysia.
The counter lost about 35% in value to close at 30 sen on May 16.
Shareholders must be agonising over the drop in the share price since its listingin April 2022 at an IPO price of 33 sen.
Cengild only managed to touch a 52-week high of 46 sen in August last year.
However, things are looking up for the healthcare providercould continue its technical rebound after breaking out from a downtrend channel in Apr 2024.
The stock could swing towards resistance thresholds of 34.5 sen and 37.5 sen.
Investors are mostly unhappy with the specialist in gastrointestinal and liver diseases for its move tochange of business model from asset light to heavy.
To set up a hospital is costly twith gestation period of between 3 to 5 years upon completion.
The property is part of a proposed construction of a 17-storey medical centre building in Kuala Lumpur to be constructed with a floor area of 187,507 sq ft based on plot ratio.
Cengild is proposing to acquire building space with a combined strata floor area of 100,442 sq ft together with at least 182 car park bays.
On the other hand, some investors believe there is no reason for the overreaction in the shares sell-off following the announcement on the purchase of the building.
This is because the pivot from renting a building to totally owning one seems rational, given there is a huge business risk if the landlord takes back the property.
Another positive on the company is its strong balance sheet.
It has no debt and sits on a cash pile of RM102 million (or 12.2 sen per share as of end-Dec 2023) or 40% of its existing market cap.
This should support any of its acquisition plans. Earnings-wise, Cengild is not exactly in a rosy position.
Its net profit fell 30% year-on-year to RM2.9 million in 2QFY24. On a 1HFY basis, its bottomline declined 16% year-on-year to RM6.5 million.
Based on its book value per share of 13 sen as of end-Dec 2023, the stock is currently
trading at a price to book value multiple of 2.3x.
Investors may be losing patience with the counter given its unexciting share price movement but it may soon change as its business bears fruit in the near term.
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104694525 : Operating cost is going to shoot up the roof when the new building is established. Profitability is going to be in question for the next 5 years and uncertainty is prevalent unless they can promise to get some high profile doctors over to boost revenue. Renumeration should change to overweight on stock options for startup. Cash flow isnt as promising over the long term.