Hong Leong initiated coverage on Kobay and has a TP of RM7

*Kobay Technology*
*An engineering paradigm for the tech sector*

*Summary*
While it is diversified (with property development and pharmaceutical), Kobay’s core and largest business is manufacturing with presence in semi/E

Geshen 2Q21 results briefing
2Q21 revenue increased +115% YoY to RM66m. Earnings increased 6.5x to RM3.7m.

Contract manufacturer. Operate out of SE Asia. 4 factories in Malaysia (Johor and Penang) and Vietnam (13% of revenues). 1 sales office in Singapore.

Mould design, metal stamping, injection moulding, spray painting. Going into box build assembly for customers.

Have 203 injection moulding machines and 78 metal fabrication machines.

Revenue by segment: Industrial (43%), office automation and data storage (20%), home and lifestyle (19%), audio (11%), medical (4%) and others (3%).

Better revenues driven by economic reopening and products entering mass production.

Invested in additional certified 100k clean room and control rooms at Johor and Penang. Will help with customers in medical and food related industry.

Increased capacity by 20% in Johor manufacturing facility and 10% in Penang.

Q: What has since 2017?
A: Top 5 customers used to be 80-90% of revenues. Very concentrated in home audio biz. Subsequently diversified customer base.

Q: Major customers.
A: Largest customer (industrial product) is ~20% of overall revenue. Constantly trying to grow 2nd, 3rd and 4th customer. Contribution fluctuates on monthly basis.Metal stamping (25% of revenues).

Q: Johor customer.
A:15% of revenue. 5-year ago is zero.

Q: Utilisation rate.
A: Varies across existing factories. 60% capacity due to workforce restrictions. Can do additional 10-15% of revenues.

Q: Box build.
A: Customer looking at capabilities out of China. Long process to qualify. Engaging with existing customers. Need to have people ready.