KUALA LUMPUR (Nov 27): Oppstar Bhd, whose initial public offering (IPO) was the best so far this year as it gained 285.71% on its debut on the ACE Market in March, saw its share price skid to a record low of RM1.33 on Monday after its financial results for the first six months ended Sept 30, 2023 (1HFY2024) missed expectations.
The counter ended Monday 28 sen or 17.39% lower than its last Friday’s closing price of RM1.61. Its market capitalisation stood at RM846.15 million.
Oppstar also ended the day as the fourth biggest loser on the local bourse amid heavy turnover, with 11.76 million shares traded, about four times its 200-day average trading volume of 2.76 million shares.
The integrated circuit design service provider has shed RM1.10 or 45.27% from a high of RM2.43 at the close on March 15, which was its maiden trading day. Oppstar's initial public offering price was 63 sen.
Kenanga Research said Oppstar's net profit for 1HFY2024 of RM9.34 million missed its expectations, accounting for only 33% of its full-year forecast, and 32% of the full-year consensus estimate.
"The variance against our forecast came largely from a sharper-than-expected decline in contributions from certain turnkey projects at their tail ends," it said.
The company's 1HFY2024 revenue stood at RM29.71 million. There were no comparable results from a year ago, as the company was only listed in March 2023.
For the second quarter ended Sept 30, 2023 (2QFY2024), Oppstar posted a net profit of RM4 million, a 24.88% decline from RM5.33 million reported for 1QFY2024.
Earnings per share declined to 0.63 sen per share, from 0.84 sen for 1QFY2024.
Meanwhile, revenue shrank by 10.54% to RM14.03 million for 2QFY2024, from RM15.68 million previously.
In a note on Monday, the research house maintained its target price (TP) of RM1.82 and "market perform" rating for the stock, but lowered its FY2024 net profit forecast by 10% to RM25.60 million to reflect a larger earnings gap between the company's old and new projects.
"We maintain our TP of RM1.82, based on an unchanged 30 times FY2025 price-earnings ratio (PER), which translates into an about 25% discount (previously 15%) to the mean forward PER of its larger international peers, given the widened gap in terms of the size between Oppstar and its international peers.
"We like Oppstar for: i) its foothold and growing presence in the front-end semiconductor space with high entry barriers, specifically stringent qualification requirements; ii) its strong design capabilities in leading-edge process nodes; and iii) its diverse customer base, both from the east and the west, given its strong working relationships with various foundries.
"However, its tepid profit performance at this juncture leaves the group vulnerable to temporary fluctuations during transitions between projects," said Kenanga Research.
The research house said potential downside risks to its call include a longer-than-expected gestation period for the company's regional expansion, single customer concentration risk with about 68% of group revenue derived from Xiamen KirinCore, and an economic downturn resulting in customers slowing down the development of new integrated circuits.