KUALA LUMPUR (Nov 14): JF Technology Bhd (JF Tech) came under selling pressure after the group announced the establishment of a new joint venture (JV) with a Chinese semiconductor firm for the design and manufacturing of electromagnetic interference (EMI) shielding materials, thermal interface and absorbing materials.

The stock fell as much as 16% or 18.5 sen to an intraday low of 96.5 sen on Tuesday, before paring some losses to close at RM1.01 — still down 14 sen or 12% from the previous trading day, valuing the group that manufactures high-performance test contacting solutions for global integrated circuit (IC) makers at RM936.33 million.

The decline came after the stock climbed 14% from the start of this month until last Friday. It climbed a sharper 26% in September before dropping 7.3% in October.

Trading volume on the stock on Tuesday amounted to 20.15 million shares, the highest since August 2021. Bloomberg data shows that the stock’s trading volume averaged 2.12 million in the past three months and 1.87 million over the past six months.

The significant share price drop on Tuesday prompted Bursa Malaysia to suspend JF Tech’s intraday short selling (IDSS), as the decline surpassed 15% or five sen from the stock’s reference price. IDSS on JF Tech will resume on Wednesday.

Earlier on Tuesday, the group announced it had formed the JV — HFC Tech Sdn Bhd — with Shenzhen HFC Co Ltd, which will see the Chinese company investing RM3.2 million for an 80% ownership in the JV entity, while JF Tech will contribute RM800,000 for the remaining 20% stake.

JF Tech managing director Datuk Foong Wei Kuong said in a statement that the company is excited to join forces with Shenzhen HFC to establish its first manufacturing facility outside of China, and that both parties would be able to leverage each other’s expertise, capabilities and network to further scale their businesses.

Foong owns a 23.72% direct stake in JF Tech and 27% indirectly via Fowa Sdn Bhd and Foong Wang (L) Foundation.

The JV with Shenzhen HFC is not JF Tech’s first collaboration with a Chinese entity. In 2020, the group partnered with Huawei Investment & Holding Co Ltd via its wholly-owned Hubble Technology Investment Co Ltd to design, develop, manufacture and supply high-performance test contactors in China.

JF Tech established a manufacturing facility in Kunshan, China to enhance the group’s presence and network in the world's second largest economy.

While Huawei is a US-sanctioned company, Shenzhen HFC is not on the US’ Treasury Department sanctioned list and the Bureau of Industry and Security’s Entity List.

“The China JV has not shown anything yet, but it is good to know about the JV with Shenzhen HFC. We think JF Tech is on the right track,” said a fund manager when contacted.

“We like the JV in China, but JF Tech is not cheap at its current valuation,” the same fund manager, who declined to be named, added.

According to Bloomberg data, JF Tech’s historical price-to-earnings ratio (PER) was 77.03 times, while industry peers like Foundpac Group Bhd – with a market capitalisation of RM242.4 million — was at 26.65 times.

Vitrox Corp Bhd, the industry bellwether for automated test equipment (ATE) sector, was trading at 41.84 times, with a forward PER of 29.61 times.

For the financial year ended Jun 30, 2023 (FY2023), JF Tech’s net profit dropped 30% to RM12.17 million from FY2022's RM17.24 million, amid a global semiconductor industry slowdown while it sold more relatively-lower margin test interface products. Its FY2023 bottomline was also affected by one-off expenses related to the group’s migration to the Main Market in December 2022.

Read also:
Bursa suspends JF Tech’s intraday short selling after over 15% share price drop
JF Tech in JV with Shenzhen HFC in bid to become one-stop solution provider