KUALA LUMPUR (Nov 17): ATA IMS Bhd saw over RM1 billion in its market capitalisation wiped off in the first three trading days of this week as its share price fell below the RM2 mark, after reporting a net loss of RM11.17 million for the second quarter ended Sept 30, 2021 (2QFY22) compared to a net profit of RM52.29 million a year earlier.

This is the electronic products contract manufacturer’s first quarterly net loss since 1QFY18 when the company, which was then known as Denko Industrial Corp Bhd, reported a net loss of RM2.23 million.

On Wednesday, ATA IMS’ share price closed 29 sen or 15.59% lower at RM1.57, after falling by as much as 33 sen or 17.74% to RM1.53, with 50.65 million shares changing hands.

The company's market capitalisation stood at RM1.84 billion based on the company’s 1.2 billion issued shares, compared with RM3.1 billion last Friday, when the share price closed at RM2.57.

ATA IMS' revenue for 2QFY22 fell to RM594.48 million, from RM1.34 billion a year earlier.

Cumulative net profit for the first half of FY22 dropped to RM12.21 million, from RM70.05 million in the previous corresponding period, as revenue fell to RM1.49 billion from RM2.08 billion.

On Wednesday, CGS-CIMB Securities Sdn Bhd analysts Nagulan Ravi and Syazwan Aiman Sobri wrote in a note that the firm remains concerned about ATA IMS' profitability for FY22 amid a lack of clarity on the timeline for foreign worker replenishment as ATA IMS contends with Covid-19 pandemic-driven labour shortage.

The analysts, who attended ATA IMS’ recent analyst briefing, said the company will continue to face a drop in sales orders should labour shortage issues persist in FY23.

"In light of this, we reduce our FY22 EPS (earnings per share) by 41% to reflect a further reduction in its foreign-to-local worker ratio in 2HFY22 and our FY23-24 EPS by 7%-24% to reflect a longer-than-expected time taken to ramp up efficiency due to shortage of foreign workers and components,” they said.

Hence, CGS-CIMB reduced its ATA IMS share target price (TP) to RM1.93 from RM2.48 previously, according to the analysts.

"Despite the uncertainties surrounding its workforce shortfall, we retain our 'hold' call [for ATA IMS shares] as we think the recent share price decline has partially, if not mostly, reflected this,” they said.

UOB Kay Hian Private Ltd analyst Desmond Chong, who also attended ATA IMS’s analyst briefing, wrote in a note on Wednesday that ATA IMS is pursuing measures including local hiring programmes and discussions with ATA IMS' main customers to rejig product offerings to minimise ATA IMS' operational glitches.

According to Chong, ATA IMS is not looking to hire contract workers to make up for the company's manpower vacuum.

While there could be a possibility of orders being temporarily diverted to other electronic products contract manufacturers from ATA IMS, Chong said UOB Kay Hian understands that there is no product pullout from ATA IMS at the moment.

"We cut our FY22-23 earnings [forecast for ATA IMS] by 29% and 8% respectively to account for lower sales and margins assumptions,” he said.

He said UOB Kay Hian maintained its "hold" call for ATA IMS shares but with a lower TP of RM2.08 from RM2.30 previously.