KUALA LUMPUR (Aug 10): Investors who took up the share placement of Genetec Technology Bhd roughly two months ago could have done it for various reasons. But one thing for sure is that they will not regret the decision, at least for now.

The loss making company, which said it has received orders from customers in the electric vehicle and battery industry since last December, is the best performing stock on Bursa Malaysia so far this year.

Genetec has climbed 1,368% or RM23.67 from RM1.73 at end-2020. The stock closed at a new peak of RM25.40 on Monday.

The company placed out two blocks of shares in June when its share price retreated from the RM5-level, which was the all-time high then. One block of 2.28 million shares was placed out at RM3.42 apiece, while another block of 2.29 million shares was placed out at RM3.33 per share.

The return of the share placements is more than 600% in about two months.

Still, this group of investors are not the ones laughing the hardest.

Who has made more from the eye-popping rally? The company's directors and employees who have been granted Employee Share Option Scheme (ESOS).

In total, about 2.33 million ESOS options have been exercised since Feb 5. These are part of the 6.59 million ESOS options offered in October 2020.

The exercise price of the ESOS options was set at RM1.37. Should Genetec employees exercise their options they would make a whopping gain of 1,579% based on the closing price of RM25.40.

According to filings with Bursa Malaysia, managing director Chin Kem Weng has been offered 560,000 ESOS options. Meanwhile, both chief operating officer Sow Ewe Lee and executive director Tan Moon Teik have been offered 500,000 ESOS options each.

Tan had a total of 3.1 million shares as at Feb 24, representing a 6.84% stake in the group, making him a substantial shareholder along with Chin who currently holds a 7.93% stake or 4.03 million shares.

Among other directors who have been granted ESOS options are non-executive director Hew Voon Foo (100,000) and independent non-executive director Teh Kim Seng (100,000).

Genetec's largest shareholder and co-founder Chen Khai Voon has been mopping up shares on the open market since November 2020.

In July, he bought a total of 1.07 million shares, equivalent to 2.1% out of the total 50.86 million shares issued. As at July 27, Chen's shareholding in Genetec increased to 9.95 million shares or 19.56%, from 9.14 million shares (18.16%) as at July 1.

Chen's wealth has ballooned by at least RM200 million, year to date.

His stake in Genetec is valued at RM252.68 million based on Genetec's last closing price, compared with RM15.8 million for 9.14 million shares at end-2020.

Genetec's management told the regulator that it was not aware of the reason behind the meteoric rise in share price when the stock exchange queried it.

Genetec was loss making in the past two financial years ended March 31, 2021 (FY21) and FY20. Its net loss swelled to RM4.38 million in FY21 from RM899,526 in FY20 although revenue was higher at RM97.07 million versus RM80.3 million.

Nonetheless, Genetec returned to the black in the first quarter ended June 30, 2021 (1QFY22) with a net profit of RM8.18 million versus a net loss of RM2.09 million in the corresponding quarter a year earlier.

The profit signalled a good start of the current financial year.

The company is currently valued at RM1.29 billion. Based on a price-earnings ratio (PER) of 20 times, for instance, Genetec will have to earn a net profit of RM64.5 million.

Will Genetec be able to make this sort of earnings to justify its share price's upward momentum? Furthermore, does it command a PER valuation of 20 times or lower?