NationGate exploring new prospects to drive growth

PETALING JAYA: Electronics manufacturing services provider NationGate Holdings Bhd is exploring new prospects to drive growth beyond its organic targets, according to UOB Kay Hian (UOBKH) Research.

It said the company is also driving growth via new customer acquisitions, and new business collaborations (via joint ventures) which could require new premises to house these trade diversion-related opportunities.

“We believe this could come from the consumer electronics segment via active collaboration with GoldTek Technology, semiconductor segment (assembly and testing services), and computing power infrastructure and server space,” the research house said.

Furthermore, it said the group had recently acquired a 100% equity stake in Hesechan Industries Sdn Bhd, which comes with a 272,900 sq ft land area, to supplement its expansion plan.

On the news of Singapore’s probes into a potential fraud in Nvidia artificial intelligence (AI) chip shipments (which is not related to NationGate), UOBKH Research said the management provided reassurance that it strictly delivers AI servers only to approved Cloud Service Partner under Nvidia’s official list, with no responsibility towards the usage or management.

“Furthermore, management noted that it has no business relationships with the entities under scrutiny.

“More importantly, we took comfort in its well-diversified order book, where only a handful of single customer accounts for more than 10% of total graphics processing server HGX system deliveries (300 to 500 systems), which helps mitigate concentration risk,” the research house added.

Following the news of potential fraud of Nvidia AI chip shipments, the group’s share price plunged to as low as RM1.03 within a week and rebounded to RM1.36 after UOBKH Research’s meetings with management and the investment community.

“While we acknowledge the necessary valuation adjustments reflecting risk premiums, we believe the sell-down was overdone.

“At RM1.36, the stock remains 26% below its post-AI diffusion framework mean reversion price of RM1.85, trading at just 14.6 times 2025 price earnings, making it one of the most attractively priced AI-exposed technology stocks,” the research house said.

On another note, UOBKH Research said the release of the Interim Final Rule on AI diffusion has cast uncertainties onto Malaysia’s AI and data centre growth narrative, particularly due to its Tier-2 categorisation, which is likely to face export caps and licensing requirements.

“However, before the hard implementation takes effect, we believe there remains a window of opportunity during the 120-day comment period (ending May 2025).

“This could allow NationGate to capitalise on frontloaded purchases and accelerated order flows from its data-computing customers, potentially triggering a sharp spike in orders,” the research house said.

The brokerage is maintaining its “buy” call on the stock with a target price of RM2.33 per share.