KESM is principally involved in specialized electronic manufacturing
activities. More specifically, the company is engaged in providing
burn-in services. The company has business dealings with virtually all
the American semiconductor manufacturers.
For the 9 months ended April 30, 2016, KESM’s EPS shot up to 52.7 sen.
This is an improvement of 244.44% over the corresponding period of the
previous year when its EPS = 15.30 sen.
In the past 2 years, the 4th quarter was better than any other quarter
of the year. Based on his fact, the 4th quarter for the fiscal year
31.7.16 should not be lower than 17.6 sen per share. Thus earnings for
the full year are likely to be not less that 70.3 sen per share.
According to its filings with Bursa, KESM has following metrics and key ratios as at 30.4.16:
Paid-up capital: RM40.015 m. Par value: RM1
Market Cap: RM240.45 (Last traded price: RM5.59)
NTA: RM6.52 per share
Current Assets: RM197.72 m
Current Liabilities: RM63.57
Current Ratio: 3.11
Quick Ratio: 2.956
Cash & short-term investment: RM112.50
Total loans: RM44.66
With a strong balance sheet and good growth in earnings, KESM should
deserve a PE of not less than 10. Should the full year’s earnings be not
less than 70.3 sen per share, the fair value of KESM should be no less
than RM7.30 per share. (This is my opinion. You may have yours.)
Historically, small-cap stocks with strong balance sheets, have
performed better than most big-cap stocks. In Malaysia, a stock with a
market cap of RM500 million is considered a small-cap stock.
Since the end of 2015, demand for smart phones, i-pads, tablets and
computers have slowed down. However, the internet of things (ioT) are
envisaged to pick up going into the 2nd half of 2016. The automotive
sector is the likely leader in this respect as car manufacturers compete
against one other to produce smarter cars.
To produce smarter cars, more and more newly innovated chips are
indispensable. And thus the demand for burn-in and testing services will
increase by leaps and bounds. This is where KESM will benefit the most
as the company’s growth engine is in the testing of semiconductor chips.
KESM is well prepared. In 2014, it completed its final phase in its
development program mainly for these services. Its plans for 2016 and
beyond are in place accordingly to its CEO, Samuel Lim in the 2015
annual report.
I am bullish on this stock. I had recommended the stock as a buy when it was at RM5 recently.
Investment is never without risk. Please do your own research before buying.
Remember, you always buy at your own risk.
Use the link below if you wish to join my Super Telegram Group:
http://blisswise.blogspot.my/2016/07/kesm-burn-in-specialist.html
