Eyeing a Strong Catch-Up in 2H
DESCRIPTION
QES Group is one of the leading ATE providers specialising in machinery and systems used for testing and validating semiconductor devices and electronic components to ensure their quality and functionality
Current Price RM0.40
Expected Return
Previous Target price RM0.40
Sector Technology
Bursa Code 0196
Bloomberg Ticker QES MK
Shariah-compliant Yes
Excluding i) net foreign exchange loss (RM1.7m), QES reported 1HFY25 core earnings of RM6.4m, down 22.9% YoY. The results made up only 41.5% of our full-year expectations. The weaker results were mainly dragged by the losses in the manufacturing segment. Nevertheless, we make no changes to our earnings forecasts as we expect a better performance in the subsequent quarters as the group secures more orders following the finalisation of the US trade tariffs. Maintain Neutral with an unchanged TP of RM0.40 based on 20x FY26 EPS. No dividend was declared for the quarter.
2QFY25 revenue expanded by 14% YoY. During the quarter, topline increased from RM68m to RM77.3m, led by stronger distribution sales, but partially offset by lower manufacturing sales. The distribution segment, which made up 89% of group sales, saw its sales rise from RM58.8m to RM68.9m, as deliveries of equipment accelerated ahead of the US tariff deadline. Manufacturing sales slipped 7.7% YoY to RM8.5m, weighed by lowers sales of i) the automated handling system series, ii) smart manufacturing series albeit an increase in deliveries of inspection systems and advanced wafer metrology system. Key markets such as the Philippines (+130%), Thailand (+157%), Indonesia (+160%), and Singapore (+239%) contributed to the stronger sales.
Core profit down to RM5.5m. Stripping out the foreign exchange losses (RM1.4m), the group’s core profit shed from RM6.3m to RM5.5m, as manufacturing segment posted a loss of RM1.7m despite higher earnings contribution from the distribution segment (+17.4% YoY).
Outlook. As of the end of July 2025, the group’s outstanding order book was lower at RM86m compared to April’s RM106m. Management expects a strong recovery in the 2H underpinned by order book replenishment in the near-term. Out of the RM86m, the distribution and manufacturing segments accounted for 87% and 13%, respectively. Meanwhile, the 2-storey new plant in Batu Kawan is now ready to be commissioned and will be expanded to manufacturing equipment by year-end as orders from the semiconductor and medical tech start to pick up. The product portfolio will be quite similar to the Shah Alam plant. It will mainly cater for the Northern region and export markets such China, India, and Europe. To improve the cost efficiency of the new plant, management plans to source its raw materials locally in Penang.
SHARE PRICE CHART
SHARE PRICE PERFORMANCE
| 1M | 3M | 6M | |
|---|---|---|---|
| Absolute Returns | -1.3 | 1.3 | -18.0 |
| Relative Returns | -6.7 | 0.9 | -18.0 |
KEY STOCK DATA
| Market Capitalisation (RM m) | 325.0 |
| No. of Shares (m) | 833.3 |
MAJOR SHAREHOLDERS
| % | |
|---|---|
| Chew Ne Weng | 30.1 |
| Liew Soo Keang | 22.8 |
T 603 2268 3015
F 603 2268 3014
E chonghoeleong@publicinvestbank.com.my
KEY FINANCIAL SUMMARY
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F | CAGR |
|---|---|---|---|---|---|---|
| Revenue | 240.6 | 269.6 | 273.0 | 284.9 | 296.3 | 3.2% |
| Gross Profit | 60.9 | 68.1 | 68.7 | 71.6 | 74.5 | 3.0% |
| Pre-tax Profit | 25.7 | 24.7 | 21.0 | 21.9 | 22.9 | -2.5% |
| Core Profit | 18.5 | 19.1 | 15.4 | 16.0 | 16.8 | -4.2% |
| EPS (Sen) | 2.3 | 2.1 | 1.9 | 2.0 | 2.1 | |
| P/E (x) | 17.3 | 19.5 | 20.9 | 20.1 | 19.2 | |
| DPS (Sen) | 0.5 | 0.6 | 0.5 | 0.5 | 0.6 | |
| Dividend Yield (%) | 1.3 | 1.4 | 1.3 | 1.3 | 1.4 |
Source: Company, PublicInvest Research estimates
Table 1: Results Summary
| FY Dec (RM m) | 2Q25 | 2Q24 | 1Q25 | QoQ chg (%) | YoY chg (%) | FY25 | FY24 | YoY chg (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 77.3 | 68.0 | 45.8 | 68.8 | 13.7 | 123.1 | 124.4 | -1.0 | Was mainly led by higher revenue from distribution segment |
| Cost of sales | -57.5 | -49.0 | -34.5 | 66.7 | 17.3 | -92.1 | -93.8 | -1.8 | |
| Gross profit | 19.8 | 19.0 | 11.3 | 75.2 | 4.2 | 31.0 | 30.6 | 1.3 | |
| Adminstrative exp | -5.9 | -5.9 | -5.4 | 9.3 | 0.0 | -11.3 | -11.1 | 1.8 | |
| Marketing and distribution exp | -3.5 | -2.9 | -1.4 | >100 | 20.7 | -4.9 | -4.6 | 6.5 | |
| Net loss on impairment of financial instruments | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | ||||
| Other expenses | -3.9 | -2.1 | -2.8 | 39.3 | 85.7 | -6.6 | -4.1 | 61.0 | |
| Other income | 0.2 | 0.3 | 0.2 | 0.0 | -33.3 | 0.4 | 1.2 | -66.7 | |
| Operating profit | 6.7 | 8.4 | 1.9 | >100 | -20.2 | 8.6 | 12.0 | -28.3 | |
| Finance income | 0.3 | 0.2 | 0.3 | 0.0 | 50.0 | 0.5 | 0.4 | 25.0 | |
| Finance costs | -0.5 | -0.5 | -0.5 | 0.0 | 0.0 | -1.0 | -1.0 | 0.0 | |
| Share of results of an associate | -0.2 | 0.2 | -0.2 | -0.4 | 0.1 | ||||
| Pre-tax profit | 6.3 | 8.3 | 1.5 | >100 | -24.1 | 7.7 | 11.5 | -33.0 | |
| Tax expense | -1.9 | -2.1 | -0.6 | >100 | -9.5 | -2.4 | -3.1 | -22.6 | |
| Net profit | 4.4 | 6.2 | 0.9 | >100 | -29.0 | 5.3 | 8.4 | -36.9 | |
| Core profit | 5.5 | 6.3 | 1.2 | >100 | -12.7 | 6.4 | 8.3 | -22.9 | After stripping out exceptional items |
| Core EPS (sen) | 0.7 | 0.8 | 0.1 | >100 | -12.7 | 0.8 | 1.0 | -22.9 | |
| DPS (sen) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | No dividend was declared for the quarter | |||
| Gross Margin (%) | 25.6 | 27.9 | 24.7 | – | – | 25.2 | 24.6 | – | |
| Pre-tax Margin (%) | 8.2 | 12.2 | 3.3 | – | – | 6.3 | 9.2 | – | |
| Net Margin (%) | 5.7 | 9.1 | 2.0 | – | – | 4.3 | 6.8 | – | |
| Effective tax rate (%) | 30.2 | 25.3 | 40.0 | – | – | 31.2 | 27.0 | – |
Table 2: Segmental Breakdown
| Segmental Breakdown: | 2Q25 | 2Q24 | 1Q25 | QoQ chg (%) | YoY chg (%) | FY25 | FY24 | YoY chg (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue: | |||||||||
| Equipment | 64.6 | 53.1 | 37.9 | 70.4 | 21.7 | 102.5 | 95.1 | 7.8 | |
| Materials & Engineering Solutions | 4.2 | 5.6 | 4.5 | -6.7 | -25.0 | 8.7 | 14.6 | -40.4 | |
| Manufacturing | 8.5 | 9.2 | 3.4 | >100 | -7.6 | 11.9 | 14.7 | -19.0 | Dragged by lower deliveries from AHS and SMS machines albeit an increase in deliveries of inspection systems and advanced AMS |
| 77.3 | 67.9 | 45.8 | 68.8 | 13.8 | 123.1 | 124.4 | -1.0 | ||
| Pre-tax profit: | |||||||||
| Equipment | 8.5 | 6.4 | 5.4 | 57.4 | 32.8 | 14.1 | 9.9 | 42.4 | |
| Materials & Engineering Solutions | -0.4 | 0.5 | 0.0 | – | – | -0.4 | 1.1 | <-100 | |
| Manufacturing | -1.7 | 1.3 | -3.9 | -56.4 | <-100 | -5.6 | 0.5 | <-100 | |
| 6.4 | 8.2 | 1.5 | >100 | -22.0 | 8.1 | 11.5 | -29.6 | ||
KEY FINANCIAL DATA
INCOME STATEMENT DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 240.6 | 269.6 | 273.0 | 284.9 | 296.3 |
| Gross Profit | 60.9 | 68.1 | 68.7 | 71.6 | 74.5 |
| Net Finance Income/(cost) | -0.8 | -1.1 | -2.2 | -2.2 | -2.2 |
| EBITDA | 32.0 | 34.3 | 29.3 | 30.5 | 31.9 |
| Share of results of an associate/JV | -0.2 | -0.4 | 0.0 | 0.0 | 0.0 |
| Others | -6.1 | -9.2 | -8.3 | -8.7 | -9.0 |
| Pre-tax Profit | 25.7 | 24.7 | 21.0 | 21.9 | 22.9 |
| Income Tax | -6.4 | -7.6 | -5.0 | -5.2 | -5.5 |
| Effective Tax Rate (%) | 24.9 | 30.8 | 24.0 | 24.0 | 24.0 |
| Core Profit | 18.5 | 19.1 | 15.4 | 16.0 | 16.8 |
Growth (%)
| -9.0 | 12.1 | 1.2 | 4.4 | 4.0 | |
|---|---|---|---|---|---|
| Revenue | -9.0 | 12.1 | 1.2 | 4.4 | 4.0 |
| Operating Profit | -14.1 | 11.8 | 0.9 | 4.3 | 3.9 |
| Core Profit | -31.1 | -11.4 | -6.8 | 4.2 | 4.7 |
Source: Company, PublicInvest Research estimates
BALANCE SHEET DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Fixed Assets | 45.0 | 77.1 | 77.7 | 78.1 | 78.0 |
| Other Long-term Assets | 21.9 | 18.9 | 18.9 | 18.9 | 18.9 |
| Cash at Bank | 102.0 | 100.5 | 100.3 | 108.8 | 118.3 |
| Other Current Assets | 106.7 | 117.5 | 129.4 | 135.0 | 140.4 |
| Total Assets | 275.6 | 314.0 | 326.4 | 340.8 | 355.7 |
| Short-term Borrowings | 16.6 | 18.4 | 18.4 | 18.4 | 18.4 |
| Long-term Borrowings | 17.7 | 36.6 | 36.6 | 36.6 | 36.6 |
| Payables | 43.3 | 50.8 | 51.5 | 53.8 | 55.9 |
| Other Liabilities | 19.6 | 20.2 | 20.2 | 20.2 | 20.2 |
| Total Liabilities | 97.2 | 126.0 | 126.7 | 129.0 | 131.1 |
| Shareholders’ Equity | 178.4 | 188.0 | 199.7 | 211.8 | 224.6 |
| Total Equity and Liabilities | 275.6 | 314.0 | 326.4 | 340.8 | 355.7 |
Source: Company, PublicInvest Research estimates
PER SHARE DATA & RATIOS
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Book Value Per Share | 0.2 | 0.2 | 0.2 | 0.2 | 0.3 |
| NTA Per Share | 0.2 | 0.2 | 0.2 | 0.2 | 0.3 |
| EPS (Sen) | 2.3 | 2.1 | 1.9 | 2.0 | 2.1 |
| DPS (Sen) | 0.5 | 0.6 | 0.5 | 0.5 | 0.6 |
| Payout Ratio (%) | 21.6 | 26.8 | 26.8 | 26.8 | 26.8 |
| ROA (%) | 7.0 | 5.4 | 4.9 | 4.9 | 4.9 |
| ROE (%) | 11.1 | 9.3 | 8.2 | 8.0 | 7.9 |
Source: Company, PublicInvest Research estimates
RATING CLASSIFICATION
STOCKS
| OUTPERFORM | The stock return is expected to exceed a relevant benchmark’s total of 10% or higher over the next 12months. |
| NEUTRAL | The stock return is expected to be within +/- 10% of a relevant benchmark’s return over the next 12 months. |
| UNDERPERFORM | The stock return is expected to be below a relevant benchmark’s return by -10% over the next 12 months. |
| TRADING BUY | The stock return is expected to exceed a relevant benchmark’s return by 5% or higher over the next 3 months but the underlying fundamentals are not strong enough to warrant an Outperform call. |
| TRADING SELL | The stock return is expected to be below a relevant benchmark’s return by -5% or more over the next 3 months. |
| NOT RATED | The stock is not within regular research coverage. |
SECTOR
| OVERWEIGHT | The sector is expected to outperform a relevant benchmark over the next 12 months. |
| NEUTRAL | The sector is expected to perform in line with a relevant benchmark over the next 12 months. |
| UNDERWEIGHT | The sector is expected to underperform a relevant benchmark over the next 12 months. |
DISCLAIMER
This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad (“PIVB”). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, Public Bank Berhad, its affiliates and related companies, directors, officers, connected persons/employees, associates or agents.
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T 603 2268 3000
F 603 2268 3014
