The retirement fund snapped up 3.5 million shares in the electronics manufacturing services provider last Friday, according to a bourse filing. This raised the fund’s shareholding to 5.02%, or 50.03 million shares, just over the 5% threshold for substantial shareholding status.
Interestingly, EPF acquired the shares on the open market the same day that Cape EMS hit its all-time low.
On that day, the shares plunged as much as 19 sen or 22% to 69 sen, falling 21% below the initial public offering (IPO) price of 90 sen. This also triggered the suspension of intraday short selling of the stock for the day. Year-to-date, the stock has fallen 35%.
In hindsight, it appears EPF made an astute acquisition. The filing did not disclose the transaction price but based on the 71 sen closing price, the block of shares could have cost the EPF over RM2.48 million.
Following this, managing director and CEO Christina Tee disposed of 1.89 million shares on Tuesday for RM1.27 million. With the disposal, her direct stake dropped to 37.86% from 38.05%.
Christina, 57, who founded the company in 2013, remains the company’s largest shareholder followed by her sister and executive director Kim Yok, 47, with a 6.81% stake.
The company was listed in March 2023 following an IPO which raised RM155.7 million.
Headquartered in Senai, Johor, Cape EMS specialises in contract electronics manufacturing, box build and full turnkey projects, as well as total supply chain management. It also has factories in Tebrau and Kempas in Johor, and a testing facility in Singapore.
Its net profit grew 32% to RM44.38 million for the financial year ended Dec 31, 2023 (FY2023) from RM33.54 million the previous year. Revenue rose 24% to RM542.8 million in FY2023 compared with RM437.9 million the year before.
However, some investors were disappointed by its fourth quarter (Q4 FY2023) net profit which fell 38% to RM5.5 million from RM8.93 million a year ago. This saw the stock hitting its then all-time low in early March as earnings came in short of market expectations.
Rising profit
In the first quarter ended March 31, 2024, net profit surged 58% to RM13.41 million from RM8.5 million a year ago, according to its bourse filing in May. The substantial rise in profit was attributed to better performance from both its industrial and consumer segments.
Quarterly revenue rose more than 12% to RM154.48 million from RM137.35 million, driven by increased demand for its products, particularly in wireless communication equipment, electronic cigarettes, and light electric vehicle segments.
Given the positive Q1 results, it is not immediately clear why Cape EMS’s shares have been pummelled recently. However, EPF’s move to raise its stake in the group implies that it sees long-term value and upside in the stock.
In an interview last week, Christina stressed that despite the selling pressure on its shares, the group’s profit margin remained “very healthy”.
She anticipates revenue to rise strongly this year and in 2025, given orders from new and existing customers in positive industries such as green energy and data centres.
Its shares ended 1 sen or 1.46% higher at 69.5 sen yesterday, valuing the group at RM689.4 million.