CEO Morning Brief

Steel Products Maker Leform’s Shares Shine Despite Being in the Red

Publish date: Thu, 30 Nov 2023, 08:45 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 30): Leform Bhd, which made its debut on ACE Market a year ago, saw its share price surge after staying range-bound for the past 12 months, despite being in the red.

In November alone, the stock climbed nearly 33%; including its gains in October, Leform has climbed over 44%.

The stock closed at 32 sen on Wednesday, giving it a market capitalisation of RM481.3 million. It has gained 39% against its initial public offering (IPO) price of 23 sen per share.

Leform shares have been actively traded, making its way to the most active list in recent weeks, as investors wondered what drove the stock higher.

It is worth noting that Leform’s shares are tightly held by managing director Law Kok Thye, who owns a 23% direct stake and 51% indirect shareholdings via Tianwen Holdings Sdn Bhd.

According to Bloomberg data, Leform’s free float outstanding shares are equivalent to only 15.6% of its total share base.

Earnings wise, the company has not fared well so far. It reported a wider net loss of RM11.09 million for the third quarter ended Sept 30, 2023 (3QFY2023), more than double the RM3.78 million loss it logged a year ago, which Leform attributed to lower selling prices, coupled with higher electricity costs and administrative expenses.

For the nine months ended Sept 30, the company incurred an accumulated net loss of RM9.4 million versus a net profit of RM8.43 million, on lower revenue.

Upon listing, the group reported two consecutive quarters of losses in 3QFY2022 and 4QFY2022, leading to a full-year net loss of RM7.28 million for FY2022, compared to a net profit of RM45.41 million in FY2021, RM7.14 million in FY2020, and a net loss of RM1.63 million in FY2019.

Nonetheless, Leform announced last Friday that its 85%-owned unit has secured a US$1.95 million (RM9 million) contract from Nim Meng Group Co Ltd in Cambodia for the supply of highway guardrail products.

While the group said the contract is expected to contribute positively to its earnings, an analyst who declined to be named said the job is not large enough to reverse Leform’s current woes.

Leform’s products are used in various end-user industries including furniture, construction as well as industrial product manufacturing industries.

Leform’s shares were valued at a price-to-earnings multiple of 7.7 times for FY2021 and 14.4 times for annualised 1HFY2022 for its listing exercise, based on a profit after tax of RM44.5 million for FY2021 and RM12.2 million for annualised 1HFY2022.

Read also:
Leform bags US$1.95m job to supply guardrail for highway in Cambodia
Leform makes subdued ACE Market debut, closes below IPO price

Source: TheEdge - 30 Nov 2023

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