KESM sees RM37m erased after downgrade

CGS-CIMB Research, which maintained its Reduce call on the counter, said it was more pessimistic about the prospects of an earnings recovery in the second half following a recent meeting with the company

KUALA LUMPUR: Semiconductor related KESM Industries Bhd's share price saw RM37mil erased from its market capitalisation at midday on Wednesday after it was downgraded.

At noon, it was down 86 sen to RM16.94 – the lowest since April 10.

Based on its shares out of 43.014 million units, the fall in its share price by 86 sen meant that RM37mil was wiped out.

CIMB Equities Research downgraded KESM, which is a burn-in tester for chips, from Add to Hold with a lower RM19.60 target price from RM22. 

It said the prolonged wafer supply shortage was a downside risk, while potential accelerating recovery in wafers supply was an upside risk to its call. 

Wafer substrate is a key raw material for the fabrication of integrated circuit (IC) chips. 

“KESM is still facing wafer supply constraints as its customers face assembly and production yield issues, but it expects the situation to improve in 4QFY18F. We cut FY7/18-20F EPS by 9%-15% to account for lower utilisation rate,” it said.