KUALA LUMPUR: KESM Industries Bhd
's core net loss of RM500,000 in 3Q19 brought 9M19 core net profit to RM2.6mil, missing forecasts.
According to Kenanga research, this came to only 20% and 23% of its and consensus estimates.
"We attribute the earnings miss to the Chinese imposition of tariffs on US vehicles and the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emission regulation, both of which affected vehicle sales in the regions during the quarter," said the research house.
MOving forward, Kenanga research said that were no major catalysts in the automotive sub-segment over the near term although long-term growth prospects in the group remain positive due to rising semiconductor content in vehicles.
"We also draw some comfort from KESM’s sturdy balance sheet with net cash standing at RM118m as at end-3Q19 (up from RM116m at end-2Q19), positioning the group well to weather through the momentary market softness.
"The group is currently working on new product qualifications for end-products such as car cameras and sensors for park-assist," it said.
Kenanga upgraded KESM to market perform with a lower target price of RM7 from RM7.20 previously.
