This article first appeared in The Edge Financial Daily, on October 23, 2015.

KESM Industries Bhd (+ve)

Shares of KESM (Fundamental: 2.5/3 Valuation: 2/3) dropped 20 sen or 3.9% on heavy volume to close at RM4.90 yesterday. This came after it closed at a 5-year high of RM5.10 a day earlier. Nevertheless, the stock is still 8.9% higher than when it was last picked on Oct 2.

KESM is engaged in specialised electronic manufacturing activities, primarily the provision of burn-in services with a focus on the automotive market. Exports to China accounted for 23% of sales in 2014.

For FYJul2015, revenue increased RM8.8 million or 3.4% y-y to RM263.1 million due to higher demand from burn-in and testing services. However, net profit surged an outsized 28.4% y-y to RM21 million as the company benefited from foreign exchange and disposal gains totalling RM2.5 million.

Moving forward, KESM’s earnings should be boosted by its acquisition of the remaining 34.6% stake in KESM Test (M) Sdn Bhd it does not own for RM35 million cash on May 13.