Is a corp exercise brewing at SALUTE 0183 SALUTICA BERHAD?

 Is a corp exercise brewing at  SALUTE 0183 SALUTICA BERHAD?


Salutica Bhd is certainly not for the faint-hearted investors.


The consumer electronic products manufacturer was languishing at below 40 sen for most of last year until it took a sharp ride upwards recently.


The counter closed 24.6% higher at RM1.09 on April 14.


At this level, Salutica has surged 172.5% in the past year, touching a 52-week high of RM1.11 from a low of 22 sen.


Interestingly, the market is expecting some form of corporate exercise brewing, causing the share upsurge.


Could there be a deal between Vitrox Corp Bhd and Salutica?


Of course, this is just a mere speculation but you can see a shareholder Cheong Siew Chyuan has recently emerged as a substantial shareholder in Salutica.


He acquired a 3.8% direct and 1.9% indirect stakes in Salutica on April 10.


Cheong is also holding 1.26% in Vitrox.


It will be interesting to see what transpires after this.


Financially, the company is not exactly in the pink of health having just undergone a voluntary separation scheme.


Net cash generated from operating activities was slashed to RM3 million as at Dec 31, 2022 from  RM8.3 million a year ago.


In the 2QFY23, it plunged further into the red with a net loss of RM3.5 million from RM1.1 million a year ago.


This was mainly due to a 76.4% drop in revenue to RM9 million from RM38.1 million.


Salutica attributed the drop in revenue to


(i) the cessation of production of the computer peripherals for one customer due to the tightening profit margin


(ii) low order volume for current running models including two Truly Wireless System (TWS) models which had moved to end of life earlier. The replacement model for TWS is at its final development stage.


(iii) the customer order for embedded computing device has been put on hold due to current unfavourable market condition for the product.


Moving forward, the company is banking on product diversification to reduce its dependency on TWS and other lifestyle electronic products which are relatively short in their product lifecycle.


On paper, it appears Salutica has some game plan to bring itself back to profitability but one need to have patience and great confidence the company will be on better footing in the near term.
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