Wisdom Wise
KESM, the burn-in Specialist
KESM is principally involved in specialized electronic manufacturing activities. More specifically, the company is engaged in providing burn-in services. The company has business dealings with virtually all the American semiconductor manufacturers.
For the 9 months ended April 30, 2016, KESM's EPS shot up to 52.7 sen. This is an improvement of 70.97% over the corresponding period of the previous year when its EPS = 15.30 sen.
In the past 2 years, the 4th quarter was better than any other quarter of the year. Based on his fact, the 4th quarter for the fiscal year 31.7.16 should not be lower than 17.6 sen per share. Thus earnings for the full year are likely to be not less that 70.3 sen per share.
According to its filings with Bursa, KESM has following metrics and key ratios as at 30.4.16:
Paid-up capital: RM40.015 m. Par value: RM1
Market Cap: RM240.45 (Last traded price: RM5.59)
NTA: RM6.52 per share
Current Assets: RM197.72 m
Current Liabilities: RM63.57
Current Ratio: 3.11
Quick Ratio: 2.956
Cash & short-term investment: RM112.50
Total loans: RM44.66
With a strong balance sheet and good growth in earnings, KESM should deserve a PE of not less than 10. Should the full year's earnings be not less than 70.3 sen per share, the fair value of KESM should be no less than RM7.30 per share. (This is my opinion. You may have yours.)
Historically, small-cap stocks with strong balance sheets, have performed better than most big-cap stocks. In Malaysia, a stock with a market cap of RM500 million is considered a small-cap stock.
Since the end of 2015, demand for smart phones, i-pads, tablets and computers have slowed down. However, the internet of things (ioT) are envisaged to pick up going into the 2nd half of 2016. The automotive sector is the likely leader in this respect as car manufacturers compete against one other to produce smarter cars.
To produce smarter cars, more and more newly innovated chips are indispensable. And thus the demand for burn-in and testing services will increase by leaps and bounds. This is where KESM will benefit the most as the company's growth engine is in the testing of semiconductor chips.
KESM is well prepared. In 2014, it completed its final phase in its development program mainly for these services. Its plans for 2016 and beyond are in place accordingly to its CEO, Samuel Lim in the 2015 annual report.
I am bullish on this stock. I had recommended the stock as a buy when it was at RM5 recently.
Investment is never without risk. Please do your own research before buying.
Remember, you always buy at your own risk.
Use the link below if you wish to join my Super Telegram Group:
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Discussions
2 people like this. Showing 19 of 19 comments
everytime Ben comes and promote its already too late...SEAL, FLBHD to name a few....
2016-07-17 16:41
he is senior guy...but...I am really not sure if he is been making money or not.. nowdays in stock market u have to be way more competitive...I think seniors should actually step out of the market.
or end up as $$ contributors to younger generations....
from their own pocket I mean via stock market
2016-07-17 16:50
The improvement in earnings from 15.30 sen to 52.70 sen is 244.44%. It was wrongly stated as 70.97%
2016-07-17 17:20
another school of thought is let the profit run
nobody knows who is right who is wrong until the match is over
2016-07-17 17:26
We are all entitled to our own opinion. Learn from everyone; follow no one.
2016-07-17 17:47
Ben...it would be easy to further evaluate on KESM...if we can have the historical Cash yield data...its average reinvestment requirements. Not sure how sustainable its ROIC in this very competitive electronic industry...
2016-07-17 18:23
Can it breakout of its resistance level???? Semicon sales in this 1st half of 2016 is stagnant. Evidence are there from the industry player such as Globetronics, Apple, Seagate, WD etc etc. So will wait and see.
http://www.semiconductors.org/news/2016/07/05/global_sales_report_2015/global_semiconductor_sales_up_slightly_in_may/
2016-07-17 18:30
automotive is growing > althought kesm is semiconductor but it is for automotive > US economy data is climbing with major indexes hit all time high > US will not bear in consecutive spending >
kesm is differ fr gtronics / inari.
2016-07-17 18:36
Not to forget! It increase due to acquire remaining 70% of its subsidiaries
2016-07-17 23:24
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Apollo Ang
CEO is a kedekut man. should be below 5.00. overvalue for now
2016-07-17 14:45