Dampened by slowdowns in the semiconductor industry, ECA Integrated Solution (ECA) only registered a marginal profit of RM0.4m for the 1HFY24. The current quarter is the third consecutive challenging one for the company. This is in contrast to RM7.6m a year ago. The weaker-than-expected results only made up 6.4% of our full-year expectation. Despite the poor results, management anticipates a robust recovery in the 2HFY24. Pending more clarity from management on near and medium-term plans, we make no changes to our earnings forecasts for now though caution for potential cuts. Maintain Neutral with an unchanged TP of RM0.41. We believe the poor financial performance is already reflected in the current share price.

• 2QFY24 topline fell 37.6% YoY. During the second quarter, revenue dropped from RM9.3m to RM5.8m, dragged by weaker sales from both Integrated Production System and Standalone Automation Equipment segments as a result of weaker demand from the semiconductor sector. Meanwhile, the Group only recorded a marginal profit of RM252k compared to RM4.1m for the same period a year ago. Gross margin fell from 57.0% to 36.2%. On a positive note, there was an improvement compared to 1QFY24 with revenue and earnings rising 3.6% and 52.7%, respectively.

• Acquired a piece of industrial land in Penang. The Group had recently acquired a piece of leasehold industrial land located in Penang Science Park North in Seberang Perai Tengah measuring 3.0471 acres from the Penang Development Corp for RM7.9m (RM60 psf). The deal will be fully settled via cash. The site is about a 10-minute drive from ECA’s existing manufacturing facility. The Group plans to set up a new manufacturing facility for automation solution and aero structure fabrication services.

Source: PublicInvest Research - 25 Jun 2024