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KESM not out of the woods yet - CGS-CIMB

22/09/2022 11:42 AM

KUALA LUMPUR, Sept 22 (Bernama) -- CGS-CIMB is cautiously optimistic about KESM Industries Bhd’s return to profitability in the financial year 2023 (FY 2023) despite expecting an improved automotive semiconductor supply chain situation next year.

The research house noted that the automotive company is confident that demand for burn-in and test services for automotive chips going into infotainment, powertrain, and advanced driving systems will continue to rise, driven by the automotive industry’s transition into electric vehicles (EV) and autonomous vehicles (AV).

CGS-CIMB said KESM’s results missed expectations as it remained in the red due to a wider-than-expected core net loss in the fourth quarter (Q4) FY 2022.

Core net loss widened to RM3.1 million from RM1.4 million in Q3 FY 2022.

Revenue fell to RM56 million quarter-on-quarter due to lower sales from the electronics manufacturing services (EMS) segment, as the group gradually reduced its exposure to lower margin services.

The group proposed a final dividend per share (DPS) of 6.0 sen, bringing full-year DPS to 7.5 sen, below its expectation of 10 sen.

KESM also incurred a higher operating expenditure, mainly related to repair and maintenance expenses in the quarter.

Hence, CGS-CIMB said it is keeping a “hold” rating on the stock with a lower RM7.30 target price in view of weaker near-term earnings prospects and sluggish sentiment in the tech sector amid a rising interest rate environment.



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