Original Post: https://www.investingnote.com/posts/1220863
My analysis on Aturmaju Resources Bhd
From wood manufacturer to IT provider - Aturmaju Resources Bhd (7181)
Aturmaju Resources Bhd’s (ARB) has recently made a strategic move that can potentially be a game changer for the group. ARB is an integrated wood manufacturer that provides sawn timber and veneer.
Over the years, the Aturmaju has faced some challenges in stabilizing the revenue stream due to instability in the supply chain. In 2017, revenue fell 67% to RM11.4 million and in 2014 the same thing happened, which combined with a rising cost of raw materials led to a 53% dip in sales.
With that in mind, the company decided to diversify its business in order to better navigate the timber industry’s hurdles. In mid-2018, the wood products manufacturer started its IT business with an RM20 million project to design, develop, install and support ERP solutions. By fall, the group had secured another three ERP projects, worth a combined RM5.6 million. A couple of days ago the company entered into a Memorandum of Understanding (MOU) with Yes’s Comm. Enterprise Sdn Bhd (YESS).
The purpose of the deal is to optimize the retailer’s supply chain using ARB’s Enterprise Resources Planning (ERP) System Integrated Solutions (“SIS”)to track sales and inventory in real time, enhance inventory management, assortment selection & forecast, and optimize logistics. In a month, the companies should sign a definitive agreement adding over RM20 million in revenues.
After a weak 1Q18,the group reported strong growth in 2Q and 3Q of 2018. Revenues in the last two quarters combined(RM8.3 million) were more than twice the revenue in the same period in 2017. Profitability also improved and earnings per share were positive (RM0.28) in 3Q for the first time in over a year.
Aturmaju Resources is now focusing its resources in the IT sector and judging by the initial momentum, it’s definitely for the best. The stock price jumped on the MOU announcement but there’s still huge potential to this strategic shift.
· Annual and Quarterly Reports