Financial Highlights

The summary of the company audited combined statements of profit or loss and comprehensive income for the Financial Periods Under Review is as follows:

• The revenue grew from RM 63 million in FYE 2020 to RM 103 million in FYE 2022, but declined to RM 94 million in FYE 2023. This is due to lower orders received from major customers, driven by lower global demand for chips caused by excess inventory.

• The gross profit margin decreased from 30.00% in FYE 2020 to 23.35% in FYE 2022, mainly due to the reduction in engineering support services for the IC assembly and testing segment. However, it then increased to 28.98% in FYE 2023.

• The PAT margin rose from 17.85% in FYE 2020 to 21.67% in FYE 2021, but subsequently declined to 11.62% in FYE 2023. It then increased to 12.22% in FYE 2023.

• The gearing ratio is 0.20 in FYE 2023, which is slightly below the benchmark range. This indicates that the company still has room to increase debt and bring it within a reasonable gearing ratio range. (A good gearing ratio should be between 0.25 - 0.5).

Major customers and suppliers

Major Customers

The company Group’s top 5 major customers for FPE 2024 are as follows:

The company is dependent on the following major customers by virtue of their revenue contributions to the Group

• Intel group of companies

• KellyOCG

Major Suppliers

The company Group’s top 5 major suppliers for FPE 2024 are as follows:

The company is not dependent on any of major suppliers as the supply of materials, parts and services can be sourced from other suppliers.

Industry Overview

According to Providence's research, the industry size for product engineering services in Malaysia, in terms of product engineering service revenue, grew from RM480.7 million in 2020 to RM691.8 million in 2022 and further grew to RM844.0 million in 2023, registering a compound annual growth rate (“CAGR”) of 20.6%. Meanwhile, the global industry size for product engineering services, in terms of product engineering service revenues, grew from USD778.3 million (RM3.3 billion) in 2020 to USD1.1 billion (RM4.8 billion) in 2022, and further grew to USD1.2 billion (RM5.5 billion) in 2023. The global product engineering services industry registered a CAGR of 15.5% between 2020 and 2023. PROVIDENCE forecasts the product engineering services industry in Malaysia to grow by 19.7% between 2024 and 2026 to reach RM1.2 billion by 2026, and the global product engineering services industry to grow by 15.4% between 2024 and 2026 to reach USD2.0 billion (RM9.4 billion) by 2026. 

Meanwhile, the industry size for IC assembly and test services in Malaysia grew from RM15.0 billion in 2020 to RM17.4 billion in 2022 and RM19.2 billion in 2023, registering a CAGR of 8.6% between 2020 and 2023.3 The global industry size for IC assembly and test services increased from USD30.1 billion (RM126.5 billion) in 2020 to USD32.5 billion (RM143.0 billion) in 2022 and USD33.9 billion (RM154.8 billion) in 2023, recording a  CAGR of 4.0%. PROVIDENCE forecasts the IC assembly and test services industry in Malaysia to grow by 10.2% between 2024 and 2026, to reach RM23.3 billion in 2026. PROVIDENCE also forecasts the global IC assembly and test services industry to grow at a CAGR of 4.5% between 2024 and 2026, to reach USD37.0 billion (RM173.1 billion) in 2026.

Furthermore, the global automated manufacturing and digitalised solutions industry grew at a CAGR of 8.2%, from USD275.9 billion (RM1.2 trillion) in 2020 to USD321.2 billion (RM1.4 trillion) in 2022 and then to USD349.2 billion (RM1.6 trillion) in 2023. Moving forward, PROVIDENCE estimates that the global automated manufacturing and digitalised solutions industry will grow at a CAGR of 8.7% between 2024 and 2026 to reach USD448.6 billion (RM2.1 trillion) in 2026. The automated manufacturing and digitalised solutions industry in Malaysia grew at a CAGR of 17.3% between 2020 and 2023, from RM7.5 billion in 2020 to RM10.3 billion in 2022 and then to RM12.1 billion in 2023.Moving forward, PROVIDENCE estimates that the automated manufacturing and digitalised solutions industry in Malaysia will grow at a CAGR of 12.7% between 2024 and 2026, to RM17.4 billion in 2026.

The key drivers in this industry:

• Growth in the semiconductor and electronics industries and manufacturing-related industries 

• Modernisation and transformation of manufacturing facilities towards Industry 4.0 and 5.0 technology to enable smart factories and sustainable operations

• Increased outsourcing and relocation of manufacturing activities to Southeast Asia

• Government initiatives to develop the automated manufacturing and digitalised solutions industry

The key risk and challenges in this industry:

• Industry players are subject to changes and uncertainties in the industries/sectors that they serve

• Industry players are face competition from other industry players

• Industry players are exposed to the legal, regulatory, political and economic risks

Future plans and strategies for 3REN BERHAD

The company future plans and strategies are summarised as follows:

1. Strengthening of their R&D capabilities

2. Setting up of new Delivery Centres

3. Establishment of a new office in Singapore

MQ Trader View

Opportunities

1. The company have a wide range of solutions and services that are complementary and can cater to different industries and manufacturing needs

2. The company secure projects/orders from wide-range of customers mostly comprising multinational companies

Risk 

1. The company is dependent on certain major customers

2. The company do not have long-term contracts and they are dependent on their ability to secure new purchase orders

3. The company is subject to project risks including delay/termination of secured orders

Click here to continue the IPO - 3REN Berhad (Part 1)

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