Wednesday, 28 July 2021

JHM: New Addition to the "Auspicious" BKIP

 


Batu Kawan Industrial Park (BKIP) in southern Penang mainland has been a great success since Boon Siew Honda first moved into it in year 2011.

There is no surprise that the state government has started the planning of BKIP2 located south of BKIP at Byram Nibong Tebal.

Up to today, many global technology giants have set up their facilities in BKIP.

Those companies include Hewlett-Packard, VAT, Jabil Circuit, Broadcom (Avago), Western Digital, Boston Scientific, Haemonitics, Micron, Hotayi, Flex, Lam Research, Bosch Automotive etc.

Apart from international companies, many local technology-related companies have set up their plants in BKIP as well.

Most of them are listed in Bursa Malaysia and their presence in BKIP indicate expansion of their businesses.

So, with increased business volumes and profits, their share prices have gained tremendously since they planned their move into BKIP.

Who are they?

The earliest local tech-related company to invest in a new facility in BKIP is UWC.

UWC has committed to this investment in early 2014, even though it was only listed n Bursa Malaysia in July 2019.

Its facility in BKIP occupies 12 acres of land and has started operation since Mac 2018. It was a massive upgrade from its old plants in Bukit Minyak. 

Those who hold on to its shares from IPO until today will see its value increases by 15 times in two years time.

Vitrox purchased 22.7 acres of land in BKIP later in Dec 2014 for RM34.2mil. It is by far the largest tract of land purchased by a local tech company.

At that time, Vitrox's share price was only around RM1.20. Now it is trading at RM18.70! It's also a 15-fold rise in its share price.

Vitrox has not finished with its business yet. It has recently announced an acquisition of another 21.04 acres of land in BKIP for RM48.3mil.

The new acquisition is part of its 10 years expansion master plan (2021-2030) which includes the expansion of its Vitrox Innovation Park as well as Vitrox University.



In Mac 2015, Pentamaster bought 3.23 acres of land in BKIP for RM5.02mil. 

After adjustment to share split & bonus issues, share price of Penta was just 10sen in Mac of 2015. Now it's at RM5.30.

This means a 50-fold rise in share price in 6 years time!

The next local listed tech company to step into BKIP is Inari. It spent RM22.8mil to purchase 5.25 acres of land in Feb 2016.

Of course the share price of Inari has already gained more than 10 times since early 2013 up to Feb 2016.

After the acquisition of BKIP land, its share price rose another 3 to 4 times until today.

MI Technovation made its move into BKIP in Oct 2016 when it purchased 6.10 acres of land at RM10.6mil. It was before its listing in Bursa Malaysia. 

MI was listed in Jun 2018 and its share price has appreciated by ~4 times since then.

In April 2019, Greatech bought a 4.20 acres land in BKIP for RM8.24mil. The company was listed in Bursa in Jun 2019.

No doubt that Greatech is a star performer in Bursa in the last 2 years in which its share price has increased by 15 times since listed which is on par with UWC.

In Jan 2021, Greatech announced another 5.9 acres of land acquisition in BKIP for RM13.37mil. 

The land is slightly larger compared to the previous one. Will its share price continue to grow as its business has potential to grow?




JHM is the latest company to join in BKIP. Even though its initial plan to acquire a piece of land here was terminated earlier this year, it quickly moved on and acquired another piece of land measuring 9.0 acres for RM21.6mil.

The size of this land is larger than most others, only smaller than Vitrox & UWC.

The rationale of the acquisition is to enable JHM to expand its business into telecommunication equipment manufacturing industries that serve multiple multinationals corporations.

The new facility is expected to start operation in the second half of year 2022.

JHM is not new in Bursa and has experienced a period of tremendous growth from year 2015 to 2018. Its share price grew more than 40 times in that period of time.

However, it's unable to sustain the growth as its revenue and profit dropped in 2019 and 2020.

With a series of new customers and expansion plans in line, can JHM start its growth engine again in 2021?

Last week, The Edge Weekly interviewed JHM's CEO Datuk Tan King Seng and published an article: JHM Consolidations sets sights on EV battery pack assembly.


The summary of this article is as below:

Automotive Segment

JHM has started supplying the components of Electric Vehicles (EV) charging stations to the US & Japanese markets since earlier this year, with an additional RM800k in revenue (?period of time).

It is involved in the design of LED lighting for autonomous EV trucks for a US customer.

JHM has successfully secured 4 new customers this year, now total 7 customers in automotive segment.

  • one new customer is Geely-Proton
    • JV with Jiangsu Dekai (JHM owns 55-60%) to supply automotive lighting to Geely-Proton Malaysia, estimated RM100mil revenue per year
    • JV with Skywoo Manufacturing S/B (JHM owns 40%) to supply audio, video & navigation (AVN) system & lighting to Proton, estimated revenue RM20mil per year from Sep21.
  • one new "big" customer has 30% shares in global automotive lighting market
    • has been awarded 4 projects since this year
    • currently bidding for another project worth RM21mil per year
  • Two other new customers have awarded projects worth USD1.8mil & USD1mil to 1.5mil.

JHM is looking forward to the assembly of EV battery packs through its partnership with Geely-Proton, as Geely-Proton is expected to introduce its EV models in Malaysia.


Industrial Segment

Through its 75%-owned Mace Hermetic Components S/B, JHM is looking to log USD45mil (RM180mil) revenue a year over a 10-year period.

The production may be delayed to Nov/Dec from Sep 2021 due to the pandemic.

The microelectronic components are used in an environment that is sensitive to noise, and in autonomous vehicles, aerospace cockpits and military components. 

JHM diversifies into telco equipment manufacturing and plans a 160,000 sq ft building at BKIP for this purpose. It is projected to contribute RM100-150mil revenue per year.

Besides, JHM is in talks to acquire 1 or 2 companies which have annual net profit of RM10mil, to grow its industrial segment by M&A.

The utilization rate of current facilities is at 60-70%, as the company has to reserve the capacity for the ramping-up of production for its customers.


JHM seems to be an overlooked tech stocks especially in front of those sizable and famous ones such as D&O, Inari, MPI, Unisem, JFTech, UWC, Greatec, Vitrox, Dufu, MI, Penta etc.

If JHM's growth plan goes to plan, who knows it can follow the footsteps of those peers after the acquisition of land in such "auspicious" BKIP?


3 comments:

  1. I think when JHM is building new factory in BKIP, the expansion looks "real" to market people. People will anticipate higher capacity higher earnings, and therefore higher stock price. That makes BKIP auspicious.

    I particularly like JHM's venture into EV business. Partnership with Geely-Proton will open up more opportunity for its EV venture. Our market people crazies about EV theme, just look at Genetec. I hope JHM can be the next Genetec :p

    Do u have target price for JHM ? I initially target to sell half at ~RM2.60, but after seeing its latest positive development, I am not certain if I should revise my target price or just hold for long long term.

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    1. When I first bought JHM, my initial target price is also around RM2.50, but who knows market will give it a higher PE of >50 later since it's expected to grow? Anyway, it's not wrong to sell in stages to lock in good profit if there is.

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