Ge-Shen primed for more M&As? | The Star

PETALING JAYA: Something is brewing in electronics manufacturing services (EMS) player Ge-Shen Corp Bhd. Its stock price is up almost 15% over the last week, closing at RM1.66 a share last Friday, which is a 52-week high.

Sources said the company is going to embark on more acquisitions, although it isn’t clear how that will be funded and what the impact will be on the stock’s earnings per share.

Indications of potential mergers and acquisitions (M&As) by Ge-Shen were laid out in its third-quarter results ended Sept 30, 2023 (3Q23).

The company said it is on the “lookout and considering more potential acquisition opportunities, in particular, contract manufacturers that have high-tech assembly capabilities and those in electronics manufacturing like PCBA/SMT capabilities”.

While mechanical components manufacturing is its strength, the group is transforming to become a comprehensive one-stop solutions provider and a box-build manufacturer.

Ge-Shen has factories in Malaysia and Vietnam.

However, its earnings have not been all that spectacular with 3Q23 net profit at RM2.14mil, bringing the year-to-date figure to RM2.58mil.

All eyes will be on its upcoming 4Q23 results as the company integrates the recently-acquired rubber compression moulding manufacturer, Kibaru Manufacturing Sdn Bhd (KMSB).

It has also secured new projects from a number of customers which came into mass production in 2023. To manage costs in view of the global economic slowdown, Ge-Shen had right-sized its headcount while re-calibrating earlier strategies.

Recall that two things have taken place at Ge-Shen recently.

One is the entry of new shareholders, namely, executive directors Datuk Keh Chuan Seng and Lee Hai Peng, in the middle of 2023.

Keh, who is now Ge-Shen’s executive chairman, first bought an indirect 27.91% stake in the company for RM49.28mil. He has since upped his interest to 29.59%.

Meanwhile, Lee initially bought a 3.81% stake and raised that to 4.69% early this year.

Prior to this, he had a long stint at Chin Hin Group Bhd, which is the main vehicle of businessman Datuk Seri Chiau Beng Teik, who has been actively buying and selling stakes in listed companies in recent years.

The second thing is Ge-Shen has been on an acquisition mode. It bought the 60% stake in KMSB in August last year for RM16.8mil.

The company said the acquisition will expand the scale of its operations and complement the group’s presence in the medical device segment, which “yields better profit margin”.

Notably, it came with a profit guarantee whereby the sellers guarantee that KMSB will achieve a consolidated net profit of not less than RM8mil for the financial years ending Dec 31, 2024 and 2025 collectively, failing which they will be liable to pay into KMSB any shortfall between the actual audited profit after tax of KMSB for that two financial years and the minimum net profit.

For 2024, Ge-Shen said a few projects which had taken a long time for qualification are likely to be on track for mass production by the first half of the year.

“We are cautiously optimistic that we will be able to weather through 2024 better than 2023,” the company said.