KUALA LUMPUR: KESM Industries Bhd's prospect remains challenging given its highly volatile nature in terms of earnings delivery compared to industry peers.
KESM reported narrower-than-expected FY23 losses as it returned to the black in the fourth quarter (Q4) FY23 owing to improved contribution from the burn-in and test segment and reduced losses at the discontinued electronic manufacturing services (EMS) segment.
While it's an encouraging sign, Kenanga Research retains its conservative view of the company, given its highly volatile nature in terms of earnings delivery.
"With its strategic RM143 million capital expenditure (capex) completed, the company is now focused on the transition to new chips for electric vehicles (EVs), which is expected to increase in loading volume gradually.
"However, we remain cautious given prevailing uncertainties within the semiconductor industry," the firm said.
Meanwhile, Kenanga Research said KESM's FY23 core net loss of RM4.9 million was narrower than the firm's net loss forecast of RM6.8 million and the consensus net loss estimate of RM6.1 million.
It said the variance against its forecast came mainly from the turnaround at its burn-in and testing services in the Q4 FY23.
"We increased FY24 net profit to RM2.7 million (from RM0.53 million) and introduced our FY25 earnings projecting a 67 per cent growth.
"We also lift our target price by 2 per cent to RM7.06 (from RM6.91) but maintain our Market Perform call for the stock," it added.
