12/10/05 (The Star) - THE shares of parent company Hovid caught theinterest of investors yesterday, after having lagged the 90% surge in theshare price of its subsidiary, Carotech.

Hovid's price rose 25 sen or 13% to RM2.17 yesterday while Carotech wasunchanged at 77.5 sen. This is the highest close for Hovid since itslisting in April.

The re-rating of Hovid's shares may have been triggered by a research notefrom Hwang-DBS Vickers Research yesterday, which pointed out that theshares had lagged that of Carotech.

Hwang-DBS said this was an opportunity to invest in Hovid which isexpected to derive 50% of its pre-tax profit from Carotech in its 2006financial year.

Carotech specialises in the extraction of tocotrienol (found in mostvitamin E), carotene complex (vitamin A) and phytosterols (sterols) fromcrude palm oil, which are used in dietary supplements, beverages, food andcosmetics.

According to Hwang-DBS, Carotech's spectacular share price performance waslargely fuelled by expectations of its planned expansion of five to eighttimes its current processing capacity.

There is also anticipation of firm prices for fatty acid methyl ester, aby-product from the production of tocotrienol and carotene, on the back ofexport demand for its biodiesel applications.

While details of the expansion plans have yet to be finalised, it isbelieved it will take two years for the new capacity to come onstream.

Hwang-DBS believes the plant expansion will cost about RM100mil.

The Hovid group recently secured a two-year contract to supplypharmaceutical products in Africa at US$3mil a year. “We expect this willcreate downward pressure on (profit) margins but is positive in the longterm for the group,” Hwang-DBS said.

The research house said Hovid shares listed in early April this year haveyet to plot visible technical trends on the chart due to short pricehistory.

The stock made an impressive debut to hit RM2 initially but slipped to alow of RM1.71 at the end of May. A gradual and steady recovery followed,resulting in the stock touching a high of RM2.04 in mid-September.