KESM tumbles to two year low after weak results

KESM Industries test equipment

KUALA LUMPUR: Shares of burn-in tester and chip maker KESM Industries tumbled to a two-year low of RM9 on Friday as its earnings disappointed the market.

At 9.55am, it had tumbled RM1.36 to RM9.20 with 372,500 shares done.

The FBM KLCI lost 4.49 points or 0.26% to 1,691.13. Turnover was 368.54 million shares valued at RM185.65mil. There were 114 gainers, 334 losers and 220 counters unchanged.

KESM reported net profit of RM2.64mil in its first quarter compared with RM11.38mil a year ago. Its revenue declined to RM81.56mil from RM90.71mil.

CIMB Equities Research said KESM’s 1QFY7/19 results fell below its and consensus' expectations due to lower- than-expected utilisation following inventory adjustment from its customers.

“We cut our FY19-21F by 41% to reflect lower utilisation assumptions and higher staff costs in view of the rising minimum wage. Maintain Hold with a lower RM11 target price, based on 14.4 times CY20F. We prefer MPI,” it said in a research note.

KESM’s revenue in 1QFY7/19 fell by 10.1% on-year due to lower utilisation on the back of sluggish demand for burn-in and testing services.

“We estimate the group’s utilisation fell below 60% in the quarter. Meanwhile raw material expenses increased by 17.3% on-year due to higher cost incurred relating to electronics manufacturing services (EMS) for new customers. 

“EBITDA margin fell by five percentage points on-year from 35.6% to 30.6% in 1QFY19. Overall, core net profit in 1Q FY19 declined by 73% on-year to RM3.2mil,”  it said.