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Glazing into the crystal ball to read ATA IMS’ future

Publish date: Wed, 01 Dec 2021, 03:32 PM

TWO events – one at boardroom level and the other at governmental level – would likely cast dark clouds over the immediate future of ATA IMS Bhd.

In a Bursa Malaysia filing yesterday (Nov 30), the company said its independent non-executive director Wong Chin Chin has resigned due to “differences of opinion” with the company’s board of directors.

Wong, 56, had served as a director of the electronic manufacturing services provider for almost five years since March 21 2017 when the company was known as Denko Industrial Corp Bhd.

A corporate lawyer since 1990 with extensive experience in the equity capital markets, Wong also served as a member of two board committees in ATA IMS, namely the audit committee and the nomination and remuneration committee.

While Wong’s departure did raise eyebrows, another event starring Human Resources Minister Datuk Seri M. Saravanan would signal a red flag.

The minister has been cited by The Star as suggesting that ATA IMS could be hauled to court if allegations of forced labour by the electronic manufacturing service provider can be proven.

“It is erroneous to say we did not take action as we opened investigation papers when complaints were received. We had given a compound notice to them and it was not paid as of today,” said Saravanan.

“As such, we will bring them to court,” added the HR Minister when wrapping up his ministerial replies on Budget 2022 at the committee stage in the Dewan Rakyat yesterday (Nov 30).

The two above events coupled with bleak outlook with CGS-CIMB Research reiterating its “reduce” stance on ATA IMS with a target price of 29 sen does not bode well for the company.

“We remain negative on ATA’s prospects post its investor update as we think the group will continue to post losses going into FY3/2023-3/2024F,” projected analyst Nagulan Ravi in a recent company update.

“We retain our ‘reduce’ call on ATA given its bleak and uncertain prospects … We will turn more bullish on its earnings prospects once we see (i) new customer wins; and (ii) clearer signs of its cost-cutting measures bearing fruit going into FY3/2023F.”

Interestingly, AmResearch has been equally bearish about ATA IMS’ prospect by maintaining its cautious stance on the company’s outlook.

“While efforts have been made to mitigate the damage to its reputation and recoup investors/stakeholders’ confidence, we reckon any concrete progress/results from the proposed solutions can only be seen over the medium term (six to nine months) with no guarantee of a positive outcome,” opined the research house.

Like CGS-CIMB Research, AmResearch also retained it “sell” call on ATA IMS but with a lower fair value of 30 sen (from 56 sen previously).

At 10.35am, ATA IMS was down 2 sen or 4.44% to 43 sen with 84.62 million shares traded, thus valuing the company at RM518 mil. – Dec 1, 2021

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