The return of buying momentum for CEB 5311 CAPE EMS BERHAD. How high can it go?

 The return of buying momentum for  CEB 5311 CAPE EMS BERHAD. How high can it go?




Electronics manufacturing services (EMS) provider Cape EMS Bhd is seeing the return of buying momentum.


The counter moved above the RM1.43 resistance level with a bullish bias may emerge above this level.


Charts show that Cape EMS’ near-term resistance level is seen at RM1.60 followed by RM1.70.


If indeed the counter reaches these near-term resistance level, it will be its new all time high since its debut on Bursa Malaysia's Main Market on March 10.


 Recall that on its first trading day, the counter soared 67% or 60 sen to finish at RM1.50 versus its IPO price of 90 sen.


This impressive debut made Cape EMS one of the best performing Main Market IPO stocks on maiden trading since last year.


Over the past 5 days alone, the stock has gained 12% to close at RM1.49 on April 20.


Looks like baring any calamity or worsening economic situation, it should not be difficult to reach fresh highs.


Even though Cape EMS has lost some ground since reaching a high of RM1.54 to touch a low of RM1.18.


However,  it has been trending higher andl way above its IPO price of 90 sen.


Thing is, the company will likely attract more institutional investors once it gets a Shariah-compliant status.


It plans to reduce contribution from e-cigarettes segment and focus on key produces such as wireless communications equipment and smart utility data collection equipment.


As a Shariah-compliant counter, many local institutional investors will be able to invest in Cape EMS, making it less susceptible to erratic price movements while giving it more credibility.


Based on Cape EMS financials, investors should have little to worry about.


For the financial year ended Dec 31, 2022 (FY22), Cape EMS saw a 28% you jump in net profit to RM33.54 mil while revenue grew 27.2% to RM438 mil.


The group’s profit after tax margin in FY22 was 7.7%, which was slightly above FY21’s 7.6% margin.


In terms of revenue, its industrial segment makes up 70% of the figure while the consumer products segment the remaining 30%.


The gearing ratio is 0.9 times (FYE 2021), and the company’s gearing ratio is over the healthy benchmark of 0.25 ~ 0.5.


Another reason for investors to be wary of is Cape EMS’ customer concentration risk as what happened to ATA IMS Bhd.


Currently, its top 5 customers contribute 85.9% of the revenue to Cape EMS.


That said, there are more compelling reasons to be bullish on Cape EMS in the near term and take advantage of the positive sentiments on the counter.
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