PETALING JAYA: JHM Consolidation Bhd’s additional income contribution from two customers is expected to kick in the second half of the year.
This will be from its two new US customers and these contracts are related to the semiconductor industry, said RHB Research in a report yesterday.
The research house has kept its “buy” rating on the stock with a target price of RM2.74 after the company entered into a joint-venture (JV) agreement to own a 40% stake of Skywooo which is a current supplier of Proton for RM800,000.
“We are positive on the news as it forays into the supply chain of a local brand car manufacturer.
“While the estimated profit may be insignificant to the group, subsequent great opportunities are aplenty, ” RHB Research said.
“Valuation remains attractive, at only 19 times forecast for the financial year 2022 (FY22) price-to-earnings ratio when comparing its growth prospects and peer valuation, ” it said.
The research house said it was positive on the news development, as it marked a milestone for the group to enter into the supply chain of a local brand car manufacturer.
“The JV company will be tasked to assemble audio, video and navigator (AVN) in the first phase with a target revenue stream of RM20mil a year.
“The estimated profit contribution from this venture may be insignificant at only 1%-2% of the estimated FY21 profit, based on a conservative margin assumption of 10%, ” it said.
Moving forward, RHB Research said JHM will subsequently also benefit from the planned localisation of parts and components for Proton vehicles, which could provide extra business opportunities and generate revenue to the group, especially in the automotive lighting component that JHM is experienced in.
It also noted that the company was currently exploring to supply parts and components of AVN and lighting components to both Skywooo and its customers.
Despite this, the research house said it made no changes to its earnings estimates for JHM as the expected profit from the assembly work of AVN remained relatively insignificant to its earnings forecasts.