KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has ceased coverage on Kobay Technology Bhd anticipating a longer turnaround time for the company on the back of a challenging macro environment.
The high precision component manufacturing and property company posted a core net profit of RM2 million for the first quarter ended September 30, 2023 (1QFY2024) on lower than expected revenue and earnings before interest tax depreciation and amortisation.
Core net profit was up more than 100 per cent quarter-on-quarter but down 86 per cent year-on-year, accounting for only four per cent of its full-year estimate.
For 1Q24, Malaysia remains the company's largest top line contributor with 86 per cent, followed by Singapore, US and others with three per cent, seven per cent and four per cent respectively.
HLIB Research said Kobay anticipates manufacturing will continue to decelerate in comparison to financial year 2023, largely due to the subdued global economic conditions.
"In addition to sustaining current customer base within the electric and electronics industry, the division will strategically broaden its client portfolio by entering the renewable energy.
This expansion will be accompanied by a careful evaluation of operations to enhance efficiency and optimize cost structure," it said.
Property development performance is also expected to be positive on the back of rise in tourist arrivals that could potentially bolster Langkawi and Penang markets.
"While pharmaceutical outlook remains strong underpinned by the increase in health awareness, this could potentially be negated by rising cost of living," HLIB Research said.
The firm said its previous "HOLD" recommendation and target price of RM1.90, should no longer be used as reference going forward.