Worst is over for KESM, says CEO

KUALA LUMPUR (Jan 8): After a disappointing financial year ended July 31, 2019 (FY19), KESM Industries Bhd sees that the worst is over as the automotive semiconductor industry has bottomed.

Speaking to reporters after its annual general meeting here today, its executive chairman and chief executive officer Sam Lim said sales and orders have been picking up for the company, adding that sales projection is also seen to strengthen.

Thus, he expects earnings for FY20 to see "a more progressive growth".

KESM's net profit grew a whopping 71.45% to RM4.53 million or 10.53 sen a share for the first quarter ended Oct 31, 2019 (1QFY20), from RM2.64 million or 6.14 sen a share for the same period last year, thanks to lower expenses and higher other income.

This was despite an 11.24% decline in revenue to RM72.39 million, from RM81.56 million in 1QFY19, owing to lower demand for burn-in, testing and electronic manufacturing services.

In FY19, however, net profit plunged some 84% year-on-year to RM6.28 million, from RM39.34 million, on the back of lower revenue of RM307.38 million, from RM349.78 million.

Lim attributed the decline in earnings last year to the impact of the US-China trade war, lower demand of cars in China as well as the anaemic health of the semiconductor industry.

Lim highlighted that KESM has "well positioned" itself to cater to the future demand for next generation of electric cars and autonomous cars, saying that KESM serves five out of the top 10 automotive semiconductor manufacturers in the world, implying its reliability.

Commenting on the prospects for the automotive semiconductor industry, he noted that this will depend on how fast the growth of change is, in particular where the 5G network comes into play.

"We see more electric cars on the road today, and more will be coming in the next 10 years," said Lim.

"[With] the 5G network expansion, this will have an influence on self-driving cars… making it smarter, faster and safer," he added.

Moving forward, Lim noted that the strategy is to deliver consistent quality, saying that KESM wants to present that sense of reliability to its customers.

At the noon break, shares of KESM were down 13 sen or 1.4% to settle at RM9.18, giving it a market capitalisation of RM394.87 million.