Financial Highlights

The following table sets out the key financial and operational highlights of the Group for the Financial Years Under Review and Financial Periods Under Review:

• The revenue grows from RM 15.9 mil (FYE 2020) to RM 50.5 mil (FYE 2022). From the data, we knew that the company's market share is growing rapidly.
• The gross profit margin grew from 19.72% (FYE 2020) and increased to 59.60% (FYE 2022). The reason that causes an increase in the GP margin is that the group was able to secure more turnkey design service projects, which command better margins. In addition, the group is also better utilization of its skilled labor resources.
• PAT margin declined from 2.64% (FYE 2020) to 32.89% (FYE.2022).
• The gearing ratio is 0 times (FYE 202), as at 31 March 2022 and 30 September 2022, the company does not have any bank borrowings. (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier

Major Customers

The Group’s top 5 major customers for the Financial Years Under Review are as follows:

According to the details, we know that the top 5 customers contribute 98.01% of the revenue to the company. Especially of the top 1 customer - Xiamen KirinCore which contributed 68.43% of the total sales on FYE 2022. Therefore, the company is involved in high-concentration customer risk, if the top 1 customer terminates the service provided by the company. It will have a serious impact on the company’s revenue.

Major Suppliers

The company mentioned they do not have major suppliers due to the nature of its business as they do not purchase or require any supplies for the operation of the business. The IC design service which they provide to their customer is rendered by its design engineers. As such, they do not have any material exposure to nor are the company dependent on any particular supplier.

Industry Overview

According to Smith Zander’’s research, the global IC design industry is represented by global IC design sales. Global IC design sales increased from NTD3.37 trillion (RM433.39 billion) in 2016 to an estimated NTD5.60 trillion (RM 827.13 billion) in 2022, at a CAGR of 8.83%.

In line with the decline in global semiconductor sales in 2019, global IC design sales decreased by 2.12% from NTD3.77 trillion (RM 504.64 billion)13 in 2018 to NTD3.69 trillion (RM 494.79 billion) 14 in 2019. Nevertheless, driven by continuous technological advancements which leads to an increased usage of ICs, as well as increased demand for semiconductors, global IC design sales recovered by 14.91% from NTD3.69 trillion (RM 494.79 billion) in 2019 to NTD 4.24 trillion (RM 605.07 billion)15 in 2020. Despite an anticipated decline in global semiconductor sales in 2023, the global IC design industry is expected to continue to grow driven by the demand for advanced chips used in high-performance computing and artificial intelligence (“AI'') devices which are less susceptible to rising inflation and external uncertainties. As such, SMITH ZANDER forecasts global IC design sales to increase by 2.50% from NTD5.60 trillion (RM 827.13 billion) in 2022 to NTD5.74 trillion (RM847.81 billion)16 in 2023.

The growth in the global IC design industry is driven by the following key drivers:

• Continuous technological advancements leading to innovation in end-user products drive the demand for ICs, which in turn drives the sales of IC design services.
  • Mobile and wireless devices
  • Fifth-generation (“5G”) wireless networks
  • AI
• An increase in IC design service outsourcing creates growth opportunities for IC design houses.
• Growth in the semiconductor industry drives the sales of IC design services.

The Key Industry Risks and Challenges

• The growth of IC design houses is reliant on sufficient suitable skilled personnel.
• Adverse economic and political conditions may adversely impact sales of the semiconductor industry, including sales of IC design services.

Source: SMITH ZANDER

Business strategies and future plans for OPPSTAR BERHAD

The company's future plans and business strategies are as follows:

1. Expansion of the workforce
2. Expanding the geographical footprint both locally and overseas
   1. New Penang Office
   2. Overseas expansion in India
   3. Overseas expansion in Singapore
   4. Overseas expansion in Taiwan
3. Business expansion through investments and acquisitions
4. Expanding the post-silicon validation services
5. The company plan to develop its IPs for RISC-V-based Soc, IPs for AI and machine learning applications as well as IPs for FPGA
6. Expanding the collaborations with local and foreign tertiary institutions

MQ Trader View

Opportunities

1. The company has achieved strong financial results, as evidenced by its growing revenue and net profit. This is a positive sign that reflects the strength of the management team.
2. The management has a clear plan for the company's direction. In addition to hiring more engineers to fulfill new contracts, the company also plans to expand into new markets and increase its global reach. These initiatives are part of the company's strategy to grow its business and increase its competitiveness.

Risk

1. The company faced high-concentration customer risk because they depend on the top 1 customer which contributed 68.43% of revenue to them.
2. The company does not have long-term contracts, and its financial performance depends on its ability to continually secure new purchase orders and contracts to maintain a steady order book. In other words, if the company is unable to secure new contracts, its growth will slow down or decline over time.

Click here to refer the IPO - OppStar Berhad (Part 1)

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