Chew : People often ask me whether QES can be as big as ViTrox, Pentamaster, Greatech and MI Technovation. I don’t discount such possibilities. That’s our plan actually. (Photo by Patrick Goh/The Edge) -A+A LOOKING up at its bigger peers, Shah Alam-based automated test equipment (ATE) manufacturer QES Group Bhd can already see itself among their ranks in the not-too-distant future.
Also its largest shareholder, QES managing director and president Chew Ne Weng, is not shy about the group’s ambition to become an equipment giant.
“People often ask me whether QES can be as big as ViTrox, Pentamaster, Greatech and MI Technovation. I don’t discount such possibilities. That’s our plan actually. It is where we want to be one day. To me, it is all about hitting the volume and scale,” he tells The Edge in a virtual interview.
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According to him, the fixed costs of QES’ manufacturing business is expected to reach a constant level, and when it reaches an inflection point, any additional revenue that comes in will largely be profit.
“I would say we are at the 60% to 70% level of reaching that inflection point. We will scale it up, and once we hit the inflection point, our profit will grow significantly within the next two to three years. By then, hopefully, our market capitalisation could reach RM1 billion,” says Chew.
Year to date, shares in QES have more than doubled. The stock closed at 62 sen last Thursday, which translates into a market capitalisation of RM517.17 million. In comparison, its better known peers MI Technovation, Pentamaster, Greatech and ViTrox have a market capitalisation of between RM2.56 billion and RM7.34 billion.
QES started in 1991 as a distributor of test, inspection and measuring equipment, before eventually becoming a manufacturer of these equipment. Today, the group has two core business divisions — namely, distribution and manufacturing.
Following the company’s listing on the ACE Market of Bursa Malaysia in 2018, many investors and fund managers have expressed particular interest in its manufacturing division, which makes equipment for the semiconductor industry.
“We have quite a large spectrum of product lines, covering various test and inspection processes, from wafer fabs all the way to test and assembly. We have all the equipment for wafer inspection, post-wafer probing and post-dicing, wafer sorting and handling, as well as wafer packing and unpacking,” Chew elaborates.
“The only area that we don’t cover is the final test, which we think is a very crowded space. The likes of ViTrox and Pentamaster are covering this area, while many other non-listed local players are there too,” he explains.
In the distribution business, QES distributes the products of principals — from countries such as Japan, the US and Europe — in the Asean region.
“We have offices in Malaysia, Singapore, Thailand, Indonesia, the Philippines and Vietnam. Of course, we also sell our own products in these markets, but the product range is different as we don’t want to compete directly with our principals,” stresses 58-year-old Chew, who co-founded QES and is the single largest shareholder with a 30.84% stake in the company.
Despite posting a slight dip in revenue in the financial year ended Dec 31, 2020, QES’ earnings jumped 2.6 times to RM8.7 million from RM3.3 million a year ago.
In the first quarter ended March 31, 2021, net profit soared to a new record high of RM6.9 million, representing a year-on-year growth of 176% from RM2.49 million a year earlier. As at March 31, cash and cash equivalents stood at RM69.4 million.
Commenting on stock valuations, Chew observes that QES had been trading at a historical price-earnings ratio (PER) of more than 60 times. But in the aftermath of its latest financial results on May 19, its PER has been reduced substantially to about 38 times currently.
“If you compare our PER with other ATE manufacturers, you will realise that QES has a good value proposition. Our stock valuation still appears to be rather attractive,” he asserts.
Expanding manufacturing business Currently, 16% to 18% of QES’ revenue comes from its manufacturing division, and the remaining 80%-plus from its distribution division.
The beauty of QES’ distribution business, Chew points out, is that it provides the group with a huge chunk of recurring income, given that it had installed more than 12,000 units of equipment in the Asean region and other parts of the world over the past 30 years.
“These equipment need to be maintained and serviced regularly. Every year, we would consistently collect a recurring income of about RM40 million, which constitutes 20% to 25% of our group revenue. In other words, our recurring income from the distribution division alone is bigger than our manufacturing division.”
Nevertheless, the manufacturing division will remain a key pillar to be built up over the next two to three years. “We hope the manufacturing business [will be able to] contribute up to 30
Edge Weekly - Chew: People often ask me whether QES can be as big as ViTrox, Pentamaster, Greatech and MI Technovation. I don’t discount such possibilities. That’s our plan actually. (Photo by Patrick Goh/The Edge) - http://www.theedgemarkets.com/article/qes-group-aims-be-bigname-equipment-player (Share from StockHunter)
@fruitcake...fools like you don't need to remind me to load up...I have already been waiting for a pullback to load up. You think the new expansion in Batu Kawan dont need money? what pay from your ass is it? Of course they need cash to pay. Oh sorry forgot you are retarded no wonder you did not know....haha
@mystery..simple logic when you want to expand dont you need liquidity? QES shares has appreciated sell and get fund rather borrow from bank. Company has provided their PnL it is a company that keeps making profit, chart is still on an uptrend. So what is bad about QES...absolutely nothing.
As i have said naysayers will say what they want to say and they will only appear when there is a pullback, ever wonder why they never ever comment when the stocks is on an uptrend? Because they have nothing to say these guys are there to scare investors to part from their money. As i have said previously I want all to make money irrelevant who you are, we are all here to make some money. So why lie and create panic and fear and of the day the money you invest and later earn is yours and same goes to me as well. There is nothing to gain from trying to cheat people. People like fruitcake should know that karma is real if it does not come now it will eventually catch up later.
Hahaha.. seems like all the dots connecting..a small disposal of shares, interviews, etc..can you see what I see forthcoming? Haha.. that said, if you are a chef trying to make a fruit cake, it is unlikely that it will turn into a cheese cake.. unless you remove the fruit topping, and added with cheese and start burning it, then it will turn into a delicious burnt cheese cake..
well, that's a technical sell signal for me..already set some selling target price tomorrow..will wait until the price made some bottom support before entering again..anyway, uptrend fundamentally good stock is always a good stock to trade with
@indon_trader couldn’t share much and have nothing much to share at this juncture..things are in place and what we need is time..patience is virtue..if you are a smart trader like some forummers above, you can do the scalping everyday for the daily gain..a number of here are seasoned investors including myself..so daily fluctuation doesn’t bother actually..cheers..
Director dump share can signify share price too high alrdy kah ! Time for them to free up capital and take profits . Try to buy some if price reach 68 cts
those who enter & currently on the red, just chill & wait patiently for it to rebounce..those who enter & still in the green can set exit plan for tomorrow cos i know u guys have always eyeing some other potential stock to get a short ride..a bit strong pullback here, so might take some time to regain strength
PE even better now as entry point ..PE 44. With QES detail strategy layout in the news recently...it is very easy for any layman to understand. Tak perlu baca annual report pun boleh faham..
QES much better than VITROX..
PE very cheap now better come in before too late..
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Sharkdoodoo
271 posts
Posted by Sharkdoodoo > 2021-06-09 14:49 | Report Abuse
dump dump dump!