KUALA LUMPUR (Jan 9): JHM Consolidation Bhd rose 4% this morming after RHB Research Institute Sdn Bhd has initiated coverage on the stock with a “Buy” rating at RM3 and target price RM3.67 and said it sees potential at the company’s automotive unit, as the group is looking to further scale up production over the next 6-12 months.

At 9.20am, JHM rose 4% or 12 sen to RM3.12 with 279,400 shares traded.

In a note today, the research house said it expects JHM’s venture into the aerospace industry to take off later this year, with further traction likely in 2019.

“The stock is currently trading at 2018F P/E of 16.4x (after factoring in profit guarantee of RM6 million from its acquisition of MACE Instrumentation SB), which we believe does not fully reflect its appealing prospects with earnings CAGR of 44.3% for FY16-19F,” it said.

RHB Research said JHM is exploring for new electronic manufacturing services (EMS) opportunities such as horticulture and professional lighting products, as well aspotentially some consumer-centric products.

It said that at present, JHM manufactures and assembles components for vending machines and other industrial products for a Singapore-based customer.

“Opportunities are likely to grow, as management is looking to wrap up one to two new projects to further expand its earnings base.

“Notably, the group expanded into the professional lighting business in 2Q17 for a leading UK-based LED design house. This niche LED product is intended to cater for use in museums and opera houses,” it said.