KESM achieved a quarterly profit of RM300,000 in Q4 FY2023, ending the group’s six-quarter losing streak.

In a note today, it has retained its “market perform” call on KESM, with a revised target price (TP) of RM7.06, up from the previous RM6.91.

This turnaround was attributed to enhanced performance in the burn-in and test segment and reduced losses in the discontinued electronic manufacturing services (EMS) segment.

KESM’s FY2023 net loss of RM4.9 million outperformed both Kenanga’s projected net loss of RM6.8 million and the consensus estimate of RM6.1 million, thanks to enhanced burn-in and testing services.

The research house has revised KESM’s FY2024 net profit projection to RM2.7 million, up four times from the previous RM530,000.

Despite the favourable quarterly results, Kenanga noted that KESM continues to grapple with earnings volatility moving forward.

“With its strategic RM143 million capex (capital expenditure) completed, the group indicated it is now focused on the transition to new chips for electric vehicles (EVs), which is expected to gradually increase in loading volume,” it said.

“However, we remain cautious given prevailing uncertainties within the semiconductor industry,” it added.

Kenanga sees KESM as an appealing investment opportunity due to its involvement in the promising automotive semiconductor sector and its status as one of the country’s leading independent burn-in and test service providers.

Its strategic presence in China also aligns well with the government’s semiconductor industry initiatives, said Kenanga.

“However, we remain cautious for the immediate term as the group still faces potential risk of sub-optimal loading volume during the transitionary period,” it further added.

As at 11.51am, KESM’s share price rose 35 sen or 4.96% to RM7.40, valuing the company at RM318.31 million.