According to Kenanga Research, Nationgate was confident that the positive earnings momentum in 3Q23 will be extended into 4Q23.
PETALING JAYA: Nationgate Holdings Bhd
posted poorer results in its third quarter ended Sept 30, 2023 (3Q23) but analysts are unperturbed as the company showed improvements quarter-on-quarter (q-o-q).
The company saw its net profit declining to RM17.28mil in 3Q23 from RM30.05mil a year ago. However, on a q-o-q basis, net profit rose from RM14.32mil.
Revenue for the quarter just ended was up 15% q-o-q at RM166.58mil driven by a recovery in the networking and telecommunications and data computing segments.
According to Kenanga Research, Nationgate was confident that the positive earnings momentum in 3Q23 will be extended into 4Q23.
“The group is taking on the production of a broader range of products from a key customer specialising in optical transceivers, as the customer relocates its base from China to Penang. This is at the expense of the customer’s China-based contract manufacturers,” the research house said.
The research house pointed out that the customer currently outsources 30% of its contract manufacturing to Nationgate, with the remaining 70% to its China-based contract manufacturers.
However, this is set to reverse over the next 18 to 24 months.
“We keep our target of RM1.70 based on an unchanged 25 times FY24 price to earnings ratio. This represents a 30% premium to peers’ forward mean, justified by the group’s favourable exposure to the fast-growing networking-product segment and its advanced capabilities which yield better margins as well as enhancing customer stickiness,” Kenanga Research said in its research note.
