Is G3 really coming back? Or is it just all a hoax?
 

In last week’s long Raya break,  G3 had made an announcement on securing an Airport Integrated Security and Safety System (“AIS3”) with the amount of RM118.38 million for KLIA and KLIA2 in collaboration with SenseTime, an AI Company that is listed on HKEX’s main board.

For the benefit of those who do not know, SenseTime had signed a long-term agreement with Honda to jointly create a L4 autonomous driving technology back in 2017, 3 years after the company had commenced their operations. In 2018, the company was entrusted by Ministry of Science and Technology of China to establish National Open Innovation Platform for Next-Generation AI right next to Alibaba Cloud, Baidu, Tencent and iFLYTEK.

As at the date of writing this, SenseTime had a market capitalization of HKD157.48 Billion.

Will the AIS3 become something G3 toys around for the sake of its share price? The chances are extremely low. Look at the price chart of G3, it doesn’t reassemble any of the “goreng” stocks in the market.

Based on the press release by the G3, they mentioned that in 2019, both KLIA and KLIA2 serves a total of 62.3 million passengers, and 72% of them are international arrivals. With the overwhelming demand of travel currently, it is very important that KLIA and KLIA2 implement the AIS3 for smoother and safer security system.

With the total contract size of RM118.38 million and project timeline ending by March 2024, this could be translated to RM29.59 million in revenue per year for G3, which is already more than the total revenue for the past 5 years individually.

G3 had also did some kitchen sinking exercises in 2021, hence the costs for the company will be relatively lower moving forward.

I would also like to highlight that the company had secured supply orders in March 2022 from government for RM32.0 million in contract value in providing end-to-end COVID-19 Test Kits solutions. So, all in all, the baseline revenue of G3 in the next 3 financial years would be RM41.2 million.

A mere 10% PAT margin will translate into RM4.12 million in net profit.

To conclude, the worst is basically over for G3 now, and the new contracts are piling in alongside with their new major shareholder. At this price, G3 is certainly a bargain that one should take note.