PETALING JAYA: The worst may be behind Oppstar Bhd
following a challenging financial year ended March 31, 2026 (FY26), with the company expected to return to profitability in FY27, says Kenanga Research.
The research house said FY26 was a tough year as the company recorded losses due to weaker demand in its integrated circuit (IC) design segment.
However, Oppstar is projected to chart a better performance in FY27, supported by a rising order book and new project wins.
“Across the IC design industry, we see increasing demand for customised chip solutions optimised for power efficiency, performance, integration and footprint, as off-the-shelf chips often fail to meet the specific requirements of artificial intelligence (AI), high-performance computing, automotive and edge computing applications,” the research house said.
It said although the firm can benefit from this trend, its management has cautioned that margins would likely remain tight, with talent competition and project execution quality being key determinants for any further re-rating.
The research house said Oppstar’s FY26 results fell short of expectations with a net loss of RM16.1mil, wider than its forecast RM11mil. The shortfall was mainly driven by a RM4.2mil impairment on trade receivables from two long-overdue China customers. Excluding this, core net loss was RM12mil.
“Management indicated that collection is ongoing and there are no further outstanding receivables from these customers.
“However, total revenue fell 46% year-on-year to RM35mil, raising concern as the IC design segment faces a slowdown in orders across specific design services, task-based projects, and full turnkey solutions. With a fixed cost base, this has compressed margins and weighed on profitability, contributing to the net loss,” Kenanga Research said.
The research house said management also highlighted that the project pipeline has expanded over the last few quarters, supporting expectations for gradual operational improvement as demand for specialised design functions remains sustained.
“Management indicated that the core business has bottomed, with capacity utilisation fully stabilised in the first half of FY27. Internal engineering headcount is now aligned with active billable projects, supported by an approximately RM50mil unbilled order book (up 67% quarter- on-quarter, the highest in the past two years), of which about 40% relates to AI-focused projects. Notably, this includes the May 18 project with Tokyo Artisan Intelligence Co Ltd,” it said.
The company has taken steps to move from a pure IC design service provider to becoming a core silicon architect focusing on edge AI solutions through strategic partnerships in key markets such as Taiwan and Japan.
“The company is building proprietary intellectual property (IP) libraries and reconfigurable AI chips, customisable for partner systems in industrial automation, robotics, physical AI, and automotive applications. Management emphasised that Oppstar’s IP forms the foundation, while partner systems integrate AI applications. This strategy aligns with its three-pronged direction – owning IP, strategic investments, and engineering services,” it said.
Kenanga Research downgraded Oppstar to an “underperform” with a higher target price of 42 sen from 28 sen based on a higher FY27 price-to-earnings ratio of 35 times (previously 28 times), applying a 30% discount to peer SkyeChip Bhd to reflect Oppstar’s ongoing recovery and current loss-making position.
