A few days ago, Aimflex Berhad (AIMFLEX, 0209), a company specializing in providing automation solutions, released an exceptional quarterly financial report, showcasing a strong performance despite prevailing challenges.

Let's begin with a brief introduction to AIMFLEX. Headquartered in Senai, Johor, AIMFLEX was founded in 2007 and got listed on the ACE Market of Bursa Malaysia in July 2019. The company operates primarily in two major segments: Manufacturing and Distribution.

The majority of AIMFLEX's revenue is generated from its manufacturing business, offering comprehensive services encompassing design, manufacturing, assembly, testing, debugging, and production deployment. Additionally, the company also engages in the design and manufacturing of metal panels, frames, and precision parts.

The remaining revenue is derived from the distribution segment, involving the distribution of software and hardware for automation equipment. Notably, AIMFLEX acts as a distributor for brands such as Digi International, Minitab, and Universal Robots. To provide a brief overview of these brands: Digi International offers wireless communication devices primarily used in IoT systems, Minitab provides statistical analysis software for manufacturing automation processes, and Universal Robots specializes in mechanical arms and robot technology.

AIMFLEX's main market presence is concentrated in Asia, including Malaysia, Singapore, India, Philippines, and Indonesia. According to the 2022 annual report, the largest market for the company is Malaysia, contributing to approximately 47.80% of the total revenue in the fiscal year 2022.

Now, let's now delve into the company's latest performance report for Q2 FY2023.

Revenue Comparison (YoY +2.19%, QoQ +38.05%)

For the second quarter ending June 30, 2023, AIMFLEX reported a revenue of approximately RM23.76 million. This represents a modest increase of around 2.19% compared to the approximately RM23.25 million reported during the same period last year. This growth is primarily attributed to the growth in the manufacturing business.

Out of the RM23.76 million in revenue, approximately RM22.19 million stems from the manufacturing segment, showing a year-on-year growth of approximately 4.42%. The remaining revenue of around RM1.56 million is contributed by the distribution segment. However, the distribution segment's revenue witnessed a decline of around 21.61% year-on-year.

From a geographical perspective, the Philippines emerged as the primary source of market revenue this quarter, accounting for approximately 53.89% of the total revenue. This is a significant jump compared to the approximately 13.00% contribution during the same period last year. In contrast, the market revenue from Malaysia decreased to around 31.98%, a noticeable drop from the approximately 56.55% recorded in the second quarter of fiscal year 2022. This shift highlights the company's diversification strategy to ensure a more balanced revenue distribution across different regions.

Comparing to the previous quarter, the company's revenue surged by approximately RM6.55 million or 38.05%, driven primarily by the manufacturing segment.

Net Profit Comparison (YoY -13.66%, QoQ +191.17%)

Due to increased export freight charges and impairment losses on trade receivables, AIMFLEX's net profit saw a decline of approximately 13.66% year-on-year, amounting to around RM2.97 million.

However, in comparison to the previous quarter, the company experienced a significant increase of approximately RM1.95 million or 191.17% in net profit. This growth was attributable to increased revenue and elevated foreign exchange gains.

Outlook

Given the current geopolitical tensions, concerns about global economic recession, and sustained high inflation, the management expresses cautiousness regarding the near-term market outlook.

Nevertheless, the company remains proactive in strengthening its global market presence. Demonstrating its commitment to strategic expansion, AIMFLEX completed subsidiary acquisitions in the first quarter of the fiscal year 2023. The company's strategy includes pursuing suitable business acquisitions, investing in research and development, harnessing innovative technologies, and expanding its product range.

It's worth noting that with the joining of Mr. Chuah, Executive Director of PENTA (7160), AIMFLEX is poised for further growth in the automation sector. Additionally, Tesla's (TESLA, INC.) entry into the Malaysian market is anticipated to have a positive impact on AIMFLEX.

So, dear readers, what are your thoughts on AIMFLEX, which boasts positive net cash and currently trades at a PE ratio of approximately 26.71 times?