STRONG demand for Mestron Holdings Bhd’s specialty poles for its telco segment is poised to boost the group’s profit margin moving forward.
Despite a resurgence in the number COVID-19 cases and imposition of a total lockdown, the group is excited with a rollout of the 5G services in Malaysia given high mast and telecommunication monopole are necessary for the development of telco infrastructures.
“A faster rollout of 5G network in Malaysia is a positive catalyst for the group as this would drive the demand for our specialty pole products,” commented Mestron’s managing director Por Teong Eng.
“The strong demand for specialty pole products increased our profit margin and overall financial performance in 1H FY2021.”
In July, state-owned special purpose vehicle Digital Nasional Bhd announced that Ericsson will design and build its 5G infrastructure at the cost of RM11 bil.
Moreover, the Government has set an aim to launch 5G services by this year-end in three cities, namely Kuala Lumpur, Putrajaya and Cyberjaya.
By 2022, it will also launch 5G services in five major cities and districts in Selangor, Penang, Johor, Sabah and Sarawak. The rollout of 5G services to cover 17 cities and rural areas is expected to commence from 2023 onwards.
Given that Malaysia is one of the largest market contributing to the group’s revenue at 93%, the sustained demand for Mestron’s specialty pole products will help to accelerate the group’s earnings growth in the near-term.
As it is, Mestron’s earnings visibility in the near-term remains intact as seen by the healthy order book in excess of eight months turnover of the company, according to Por.
The group will partner Samdo Smart Solar (M) Sdn Bhd to jointly undertake engineering, procurement, construction and commissioning (EPCC) services for six solar power systems for telco towers in Malaysia.
Por expects the joint venture to contribute a sustainable and recurring income stream for the group going forward.
“We are cautiously optimistic of the prospect for the group but we can’t rule out the potential disruption from the re-imposed MCO 3.0 on our production line,” he opined.
“This could also have an impact on the rollout of the 5G services. Having said that, the management has taken various measures to put in place proper standard operating procedures (SOPs) to minimise the risk of COVID-19 infections.”
Mestron posted a net profit of RM1.6 mil for its 1H FY2021 ended June 30, 2021 despite a difficult period of lockdown restriction (1H FY2020: RM790,000).
However, its revenue rose 19% to RM22.6 mil from RM19 mil a year ago, prompted by the first movement control order (MCO 1.0) which resulted in a delay of the group’s scheduled deliveries during the financial quarter ended June 30, 2020.
At the close of today’s trading, Mestron was up 0.5 sen or 1.47% to 34.5 sen with 10.74 million shares traded, thus valuing the company at RM313 mil. – Aug 27, 2021
