KUALA LUMPUR: Mega First Corp Bhd is expected to see its topline grow threefold from its proposed acquisition of a 64-per cent stake in CSC Agriculture Holdings Sdn Bhd.
Public Investment Bank (PublicInvest) stated that Mega First's acquisition of CGC Agriculture would value the entire company at RM39 million.
"Despite minimal earnings contribution, management believes that it could potentially become a growth driver for the group and has set a target of growing the topline by more than three times.
"For this year, we expect to see negligible impact on the group's bottomline," it said in a note.
Mega First announced that it has entered into a share subscription agreement with CSC Agriculture and the existing shareholders to subscribe for a 64 per cent stake in the latter for RM25 million.
This will allow Mega First to tap on the latter's agricultural platform for its modern farming venture in Perak.
"We understand that the gestation period is short, as the vegetable cycle, including the nursery, takes up to 30 days. Management advised that it plans to move away from the retail channel to focus on farming, especially greenhouse planting and wholesale distribution.
"Under the plan, the 64 percent-owned modern farming business is set up on a piece of 300-acre land in Perak, adjacent to its existing corporate green power project with Pekat Group. Throughout the period, it will expand its vegetable portfolio subject to market demand and successful harvesting of the vegetables and fruits, as well as market parameters for grading purposes," said the firm.
CSC Agriculture has its own farms in Pahang and Johor, with existing distribution channels in the southern region.
Under the plan, Mega First will ride on the CSC Agriculture's agricultural knowledge to venture into modern farming in Perak by applying eco-friendly coco peat instead of soil.
PublicInvest maintained an "outperform" call on the company with a revised target price of RM5.36.