HLIB Research cut its target price for Kobay to RM2.38 a share from RM4 previously.
PETALING JAYA: Weaker prospects for Kobay Technology Bhd
’s manufacturing and pharmaceutical businesses have led Hong Leong Investment Bank (HLIB) Research to downgrade it to a “hold” following lower earnings revisions for its coming financial years.
The research house also cut its target price for Kobay to RM2.38 a share from RM4 previously.
Kobay’s third quarter and nine-month financial year 2023 (FY23) performance were disappointing as the group faced rising cost pressure and weaker demand, especially for its manufacturing and pharmaceutical business.
Kobay’s nine-month FY23 core net profit of RM29mil was 26% lower year-on-year (y-o-y) due to under delivery by the manufacturing division, which experienced a 34% y-o-y slump in revenue to RM44mil in the 3Q23 while its pharmaceutical segment’s 3Q23 revenue was 33% lower y-o-y at RM18mil.
The performance would have been worse if not for the higher contribution from Kobay’s property development business, which has an ongoing project on Langkawi island.
“The nine-month FY23 one-off items include amortisation of deferred income on government grants, personal protective equipment disposal gain and foreign exchange loss,” HLIB Research pointed out. The research house also identified Kobay’s two new manufacturing projects in incubation stage as another drag on its performance.
With no sign of a quick recovery in demand or inflationary pressure and the risk of recession in some advanced markets, the research house has cut Kobay’s FY23 to FY25 earnings per share by 31%, 25% and 27% respectively.
