Over the past few days, Cape EMS Berhad (“CEB”) has experienced a significant decline in its share price over a one-month period.

To recap, CEB was listed in March 2023 with an IPO price of RM0.900. At one point, the share price reached its peak at RM1.530.

As its name suggests, CEB is a leading Electronic Manufacturing Services (“EMS”) provider in Malaysia, with a distinguished clientele including Tastar Electronics, Eureka, Mimosa, and Vectrix.

Unlike other EMS providers, CEB serves a diverse range of clients, including those in the Point-of-Sale (“POS”) systems, consumer electronics, e-cigarette, and Electric Vehicle (“EV”) sectors.

One of the most notable developments for CEB has been the acquisition of iConn Inc., which contributes approximately RM12.0 million in profit after tax (PAT) annually.

This raises the question: What caused CEB’s share price to drop?

According to various sources, there appears to be an adjustment in the financial performance expectations for the company. While the exact figures are not clear, it seems that the recent sale of shares was carried out by fund managers.

Fundamentally, CEB is a company with a well-diversified client portfolio, consistent financial results, and profit margins that exceed the industry average.

We believe that this selloff is largely unwarranted. Given the current market capitalisation of RM655.0 million, and based on conservative historical financial forecasts by analysts, this should present a good buying opportunity and the market is indeed overreacting.

Let’s continue to monitor this EMS company closely.