KUALA LUMPUR (April 13): Shares of JCY International Bhd Bhd rose in the morning trades today after CIMB Research said the company intends to take advantage of potential merger and acquisition (M&A) activities to increase its market share and improve margins via better economies of scale.

At 9.50am, JCY International rose 2.55% or 2 sen to 80.5 sen with 3.05 million shares done.

In a note April 10, CIMB Research said it expects the likely consolidation among the hard disk drive (HDD) component manufacturers to boost industry profitability, given that a few of HDD components manufacturers were still struggling to recover from the devastating floods in Thailand.

The research house said JCY International had strong balance sheet, prudent cash management and years of experience.

“JCY plans for capex of RM200 million–300 million over the next five years as part of its strategy to improve operating efficiency and increase automation.

“Management aims to gradually reduce group employee headcount by 5,000 (30% of current total) from 18,000 currently to 13,000 over the next 3–5 years.

“We understand that this could reduce its labour costs currently from 27% of total operating costs to less than 20%,” it said.