JHM Consolidated likely to benefit from 5G rollout on demand for signal test modules

PETALING JAYA: JHM Consolidated Bhd is expected to gain from 5G global rollout as demand for signal test modules increases and so do electric vehicles (EV) charging stations related components.

JHM has also started supplying parts and modules used in a new horticulture project. That is expected to turn in a contribution of about Us$1mil in the current financial year, said Kenanga Research.

“On the overall, we project this division to grow at an exciting rate of 24-36% in financial year 2020 and 2021,’’ the research house said.

It added that the industrial division contributes about 33% of revenue.

“We expect a ramp-up in orders from 5G signal test modules and EV charging station-related components. This renders JHM a proxy for the global 5G infrastructure rollout and the growing prevalence of EV charging stations,’’ it said.

Kenanga Research said JHM is one of the biggest laggards in the technology sector as investors weighed the impact from the ailing global automotive industry as well as discounting JHM’S aerospace venture angle.

“We think these factors have been very much misconstrued,’’ the house said.

Notwithstanding the Covid-19 impact, the research house said JHM’S automotive segment is expected to register a strong second half in FY2020.

This is because it has recently secured several new customers including a car manufacturer and its LED modules have penetrated the commercial vehicles market as previously it was only passenger vehicles.

It said the global automotive sales were rebounding, and LED content in automobiles would continue to grow.

As for its aerospace business, the contribution is 1% to group sales and global aircraft orders in general are not cancelled but deferred.

After the latest first quarter results FY20, JHM as a group has returned to full workforce since end-april.

“We gather that there was no order cuts by customers. In fact, a huge backlog has to be fulfilled by July. From the current bookings, three to six months ahead, which is underpinned by pent-up demand orders of automotive LED modules and 5G modules, we believe its second half FY20 performance is likely to come back with a vengeance,’’ it added.

It has forecast net profit of Rm31.6mil and Rm49.9mil for FY20 and FY21 respectively. It also has an “outperform’’ recommendation on the stock with a target price of RM2 a share.

The risks includes less aggressive orders from its key customer which translates to lower-than-expected sales, delay in 5G rollout, and higher-than-expected input costs, according to Kenanga.