Results Note
29 November 2021
JHM Consolidation MARKET PERFORM ↔
Price: RM1.67
The Worst is Over Target Price: RM1.80 ↓
By Samuel Tan / samueltan@kenanga.com.my
As pre-empted by the group earlier, JHM’s 3QFY21 Share Price Performance
performance suffered from the extended lockdown with CNP
of RM3.4m (-47% QoQ; -57% YoY), bringing 9MFY21 CNP to
RM13.4m (-0.5% YoY). The results came in slightly below
expectations, representing 54%/50% of our/consensus’ full-
year estimates. Moving into 4Q, we are sanguine for a
meaningful recovery as orders remained intact and JHM has
been able to operate at 100% workforce, which is timely as
the group enters its seasonally stronger quarter. Maintain
MARKET PERFORM with an adjusted Target Price of RM1.80.
Slightly below expectations. JHM recorded 3QFY21 CNP of RM3.4m
KLCI 1,512.22
(-47% QoQ; -57% YoY), bringing 9MFY21 CNP to RM13.4m (-0.5%
YTD KLCI chg -7.6%
YoY) after adjusting for unrealised forex gain and land sale worth YTD stock price chg -12.6%
RM8.2m. The results came in slightly below expectations, representing
54% and 50% of our and consensus full-year estimates, respectively. Stock Information
Shariah Compliant Yes
Results’ highlight. QoQ, 3QFY21 CNP fell 47% to RM3.4m on a 15%
Bloomberg Ticker JHMC MK Equity
decline in revenue to RM59.2m. The larger quantum of decline in CNP Market Cap (RM m) 931.2
was due to a RM3.6m profit guarantee recognised earlier in 2QFY21 Shares Outstanding 557.6
from its subsidiary, Mace Instrumentation Sdn Bhd. As pre-empted by 52-week range (H) 2.67
the management, the group still suffered from lower utilisation rate and 52-week range (L) 1.53
higher unabsorbed cost during the period as its manufacturing facilities 3-mth avg daily vol: 4,015,740
(mainly in Kedah) faced sporadic lockdowns due to Covid-19 cases in Free Float 59%
the area. This discrepancy in earnings compared with Penang Beta 1.0
counterparts can be explained with the fact that Penang was three
Major Shareholders
months ahead of Kedah in the National Recovery Plan progression. YoY,
Tan King Seng 34.2%
3QFY21 revenue fell 24% while CNP sank 57% on margin compression
Noble Matters Sdn Bhd 12.1%
owing to higher cost incurred for Covid-19 SOP implementation.
Great Eastern Life Assurance 4.4%
Cumulatively, 9MFY21 revenue increased 16% to RM201.8m on higher
orders from the automotive and industrial segments while CNP remained Summary Earnings Table
flat at RM13.4m. FY Dec (RM m) 2020A 2021E 2022E
Turnover 251.0 280.3 330.0
All eyes on 4Q. With the worst over, we are hopeful for a meaningful EBITDA 46.4 44.3 65.4
recovery in the upcoming 4Q given that JHM now operates at 100% PBT 32.7 29.9 48.8
capacity since mid-Sept, which is timely as the group enters its seasonally Net Profit (NP) 24.6 23.3 38.0
stronger quarter. In addition, there was no order cancellation and certain Consensus (NP) N.A. 26.9 45.9
customers are agreeable in sharing higher material cost as well as logistical Earnings Revision N.A. -6% -7%
cost. Barring any further uncontrollable circumstances, JHM should be able EPS (sen) 4.4 4.2 6.8
to see decent margin recovery in the subsequent quarters. EPS growth (%) -25.5 -5.3 63.3
NDPS (sen) 1.5 1.5 1.5
Trim FY21E/FY22E CNP by 6%/7% to RM23.3m/RM38.0m, to account BVPS (RM) 0.39 0.45 0.50
for the unabsorbed cost during the extended lockdown and deferred Price/BV (x) 4.3 3.7 3.3
production timeline. PER (x) 37.8 40.0 24.5
Gearing (x) 0.3 0.2 0.2
Maintain our MARKET PERFORM call with a lower Target Price of ROA (%) 7.3 6.7 9.8
RM1.80 (previously RM1.90) based on 26x FY22E (+1SD to its 3-year ROE (%) 11.3 9.4 13.6
mean). Dividend Yield (%) 0.9 0.9 0.9
Risks to our call include: (i) lower-than-expected sales, (ii) reduction in
orders from its key customers, and (iii) unfavourable currency
translations.
PP7004/02/2013(031762) Page 1 of 4
JHM Consolidation Results Note
29 November 2021
Result Highlight
3Q 2Q QoQ 3Q YoY 9M 9M YoY
FYE: Dec (RM m) FY21 FY20 Chg FY20 Chg FY21 FY20 Chg
Revenue 59.2 69.3 -14.5% 78.1 -24.2% 201.8 174.7 15.5%
EBIT 4.8 11.9 -59.9% 8.5 -44.1% 28.0 20.2 39.0%
PBT 4.3 11.4 -62.3% 8.0 -46.8% 26.5 18.7 42.0%
Taxation -1.1 -2.0 48.0% -2.7 61.1% -4.9 -5.3 6.9%
Net Profit (NP) 3.2 9.3 -65.1% 5.3 -38.9% 21.6 13.3 61.7%
Core NP 3.4 6.3 -46.6% 7.9 -57.4% 13.4 13.4 -0.5%
EPS (sen) 0.6 1.1 -46.6% 1.4 -57.4% 2.4 2.4 -0.5%
DPS (sen) 0.0 0.0 0.5 0.0 0.5
GP margin 14.7% 16.8% 21.1% 17.7% 19.7%
EBIT margin 8.0% 17.1% 10.9% 13.9% 11.5%
Pretax margin 7.2% 16.4% 10.3% 13.1% 10.7%
CNP margin 5.7% 9.1% 10.1% 6.6% 7.7%
Effective tax rate -24.8% -17.9% -33.9% -18.7% -28.5%
Source: Kenanga Research
Operating segment
3Q 2Q QoQ 3Q YoY 9M 9M YoY
FYE: Dec (RM m) FY21 FY20 Chg FY20 Chg FY21 FY20 Chg
Revenue 59.0 69.3 -14.8% 77.6 -23.9% 201.6 174.2 15.7%
Automotive 30.9 44.7 -30.9% 48.3 -36.0% 119.4 102.3 16.7%
Industrial 28.3 25.0 13.3% 28.3 -0.1% 82.1 70.4 16.7%
Others -0.1 -0.4 63.7% 1.0 -114.1% 0.1 1.6 -95.1%
Source: Kenanga Research
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JHM Consolidation Results Note
29 November 2021
Malaysian Technology Peers Comparison
Core Earnings ROE Net Div
Name Revenue Growth PER (x) - Core Earnings PBV (x)
Last Price Market Cap Shariah Current Growth (%) Yld (%) Target Price
Rating
(RM) (RM'm) Compliant FYE 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 2-Yr. 1-Yr. 1-Yr. 1-Yr. (RM)
Hist. Hist.
Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd. Fwd.
D&O GREEN TECHNOLOGIES BHD 5.78 6,928.2 Y 12/2021 48.9% 26.4% 123% 34.0% 141.7 63.5 47.4 17.0 13.9 21.9% 0.2% 6.60 OP
GHL SYSTEMS BHD 1.88 2,146.0 Y 12/2021 4.3% 36.3% -10.5% 71.6% 69.5 77.6 45.2 4.5 4.2 5.4% 0.0% 2.30 OP
INARI AMERTRON BHD 4.17 15,407.4 Y 06/2022 22.5% 14.6% 11.3% 14.7% 43.4 35.9 1.3 10.4 10.2 26.4% 2.5% 4.80 OP
JHM CONSOLIDATION BHD 1.67 931.2 Y 12/2021 11.7% 17.7% -5.3% 63.3% 37.8 40.0 24.5 4.3 3.7 13.6% 0.9% 1.80 MP
KELINGTON GROUP BHD 1.49 958.1 Y 12/2021 25.5% 40.1% 84.7% 45.7% 61.9 33.5 23.0 6.4 5.6 16.7% 0.7% 2.50 OP
KESM INDUSTRIES BHD 12.66 544.6 Y 07/2022 4.9% 6.4% 4072% 250% 131.0 37.4 25.0 1.5 1.4 3.8% 0.7% 11.40 MP
MALAYSIAN PACIFIC INDUSTRIES BHD 49.18 9,781.7 Y 06/2022 10.0% 10.0% 11.3% 10.0% 32.2 28.8 26.2 7.1 8.0 15.6% 0.6% 56.20 OP
P.I.E. INDUSTRIAL BHD 3.72 1,428.6 Y 12/2021 59.9% 10.6% 31.0% 29.9% 32.3 24.7 19.0 1.3 1.5 11.5% 1.8% 4.30 OP
SKP RESOURCES BHD 1.95 3,046.6 Y 03/2022 12.3% 12.4% 21.7% 12.4% 21.6 17.7 15.8 4.1 3.7 21.0% 2.8% 2.60 OP
UNISEM (M) BHD 4.24 6,839.5 Y 12/2021 20.0% 15.0% 47.5% 21.0% 46.8 31.7 26.2 3.8 3.5 11.2% 1.4% 4.90 OP
Source: Kenanga Research
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PP7004/02/2013(031762) Page 3 of 4
JHM Consolidation Results Note
29 November 2021
Stock Ratings are defined as follows:
Stock Recommendations
OUTPERFORM : A particular stock’s Expected Total Return is MORE than 10%
MARKET PERFORM : A particular stock’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERPERFORM : A particular stock’s Expected Total Return is LESS than -5%
Sector Recommendations***
OVERWEIGHT : A particular sector’s Expected Total Return is MORE than 10%
NEUTRAL : A particular sector’s Expected Total Return is WITHIN the range of -5% to 10%
UNDERWEIGHT : A particular sector’s Expected Total Return is LESS than -5%
***Sector recommendations are defined based on market capitalisation weighted average expected total
return for stocks under our coverage.
This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not
make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the
specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This
document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees.
Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document
or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or
employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or
otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies.
Published and printed by:
KENANGA INVESTMENT BANK BERHAD (15678-H)
Level 17, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia
Telephone: (603) 2172 0880 Website: www.kenanga.com.my E-mail: research@kenanga.com.my
PP7004/02/2013(031762) Page 4 of 4
