This article first appeared in The Edge Financial Daily on July 11, 2018
Nova MSC Bhd
(July 10, 18 sen)
Not rated: Nova MSC Bhd is an ACE Market-listed company primarily involved in developing and supplying smart e-solutions in three main segments: smart healthcare, government digitalisation, and building automation and control. It targets both government and private entities. All its softwares are developed fully in-house. Nova’s current operations are mainly in Singapore (98% of its financial year 2018 [FY18] revenue) but it also has presence in other Southeast Asian countries such as Brunei, Malaysia, and Indonesia.
The crown jewel of Nova’s digital government system segment is the construction and real estate network (Corenet) that it developed 100% in-house and has been used by the Singapore government since 2001. The system connects 16 Singapore government agencies, providing a one-stop point for the e-submission and processing of all applications related to the construction and real estate industry. In October 2017, Nova announced that it had secured an RM83 million contract to upgrade the system to Corenet 2.0 and maintain it until October 2023.
According to a report by McKinsey & Co, the global government digitalisation industry is estimated to be worth US$1 trillion (RM4.01 trillion) annually. As Nova is confident of its strong track record for providing e-government services to well-recognised clientele such as the Singapore and Brunei governments in various business segments, the group believes that it could stand to benefit from the growing demand. Nova’s total reported outstanding order book at end-FY18 was at an all-time high of RM232 million.
Nova also promotes smart healthcare by developing e-solutions to automate and streamline operations of healthcare institutions. These include its multi-organisation architecture system (Vesaluis.geo) that integrates multiple healthcare systems involving front line, clinical, ancillary support and back-end services into one. Users of this system include highly established hospitals such as Novena Medical Centre (Singapore), Changi General Hospital (Singapore), and Penang Adventist Hospital (Malaysia).
Nova has no direct peers given its unique exposure to smart healthcare solutions. In the e-solution space (including e-government product providers), its closest peers are My EG Services Bhd, Dagang NeXchange Bhd (DNeX), Datasonic Group Bhd, and GHL Systems Bhd, which collectively trade at calendar year 2019 Bloomberg consensus forecast price-earnings ratio of 15.9 times. Although it has been loss-making in the past two years (FY17-FY18), Nova strongly believes the worst is over and all the kitchen-sinking exercises have been done. It is confident of returning to the black in FY19, thanks to a record-high order book, better overall cost control; and more potential contract wins. — CGSCIMB Research, July 9