KUALA LUMPUR, MAY 23, 2024 – Contract manufacturer Ge-Shen (the Group) experience a surge in profit-after-tax (PAT) of 275% at the start of financial year of 2024, rising from a loss of RM1.76 million to RM3.07 million in the quarter ended 31st March 2024, compared to the corresponding period a year ago.
In a bourse filing today, the company’s revenue also recorded an increase of 28.1% from RM57.67 million to RM73.85 million in Q1 FY24.
The Board highlighted the increase in revenue was mainly contributed by the factories in Penang and Vietnam as well as from the newly acquired subsidiary in Kedah.
The Company’s profitability saw a boost in tandem with heightened sales, attributed to improved economies of scale, enhanced cost management, optimal staffing levels across factories, and further bolstered by forex gains and gains from fixed asset disposals at the Johor factory.
The Board believes that the growth trajectory in both revenue and profitability will be able to sustain into the coming years as the Group completes the acquisition of Local Assembly Sdn Bhd and Amity Group.
Despite the conflicts in the European and Middle East regions, the Group is witnessing a recovery in terms of customer purchase orders, driven by depleting inventories among major customers. The Board also highlighted that the rising minimum wages in Malaysia and Vietnam could potentially impact the Group’s performance moving forward. With discussions on minimum wage hikes of up to 6% in Vietnam and the removal of petrol and electricity subsidies in Malaysia, there may be a contribution to higher inflation, thus affecting the Group’s margin.
The Board remains committed to the adoption of automation and modernization across all factories, deeming it necessary to protect the Group’s margin. Additionally, investments in ERP systems are considered essential to bolster manufacturing processes and backend operations.
Despite the volatility of the US dollar, the Board remains cautiously optimistic about the Group’s performance for the rest of the year, given its current acquisitions and growth plans.
Shares of Ge-Shen fell by 0.8% to close at RM 3.87 on Thursday, resulting in a market capitalization of RM487 million. Year to date, the counter has risen by 234%.