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KESM’s FY23 core net loss of RM4.9 million was better than both Kenanga’s forecasted net loss of RM6.8 million and the consensus estimate of RM6.1 million, primarily due to a turnaround in its burn-in and testing services during Q4 FY23. However, the company’s revenues decreased by 7.5% compared to the previous year, mainly attributed to reduced volume in burn-in and test services and the discontinuation of the EMS segment.
Following a strategic capital expenditure (capex) of RM143 million, KESM is now focusing on transitioning to new chips for electric vehicles (EVs), a move expected to gradually increase loading volume. Despite this strategic shift, Kenanga Research maintains its conservative view on KESM due to the prevailing uncertainties within the semiconductor industry.
Kenanga Research also increased its FY24 net profit forecast for KESM to RM2.7 million from RM530,000 ($1 = INR4.6890) and introduced FY25 earnings projections showing a 67% growth rate. While acknowledging KESM’s promising position in the automotive semiconductors space, its role as one of Malaysia’s largest independent burn-in and test service providers, and its presence in China, Kenanga also pointed out potential risks including slower-than-expected growth in burn-in and test services volume, slower adoption of new semiconductor modules in automobiles, and a sudden decline in customer demand.
Despite the positive Q4 FY23 results, Kenanga Research retains its ‘Market perform’ call on KESM due to the company’s highly volatile nature in terms of earnings delivery.
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