ACE-Market listed Genetec Technology Bhd has continued to amaze – riding very much on the electric vehicle (EV) hype.
The unheralded innovative design firm resumes its astronomical climb this morning, hitting another all-time high of RM19.90 before settling at RM1.06 or 5.66% to RM19.78 at the time of writing (11.01am) with a volume of 699,800 which gave the company a market capitalisation of RM1 bil.
A check on Genetec’s price trend chart reveals that an acute uptrend started on June 28 (from RM6.75) which coincided with the release of a non-rated report on the company by CGS-CIMB Research. For comparison purpose, Genetec closed at RM3.70 on May 31.
Further fuelling the optimism was a non-rated report on the company by CGS-CIMB Research on June 28 June. The report noted that the ACE Market-listed company was confident that it can benefit from the growing demand for EV vehicles worldwide.
“The group plans to ride on the structural shift in the global automotive industry from internal combustion engine (ICE) towards EV,” wrote analysts Walter Aw and Mohd Shanaz Noor Azam in the report which does not represent initiation into CGS-CIMB’s coverage universe.
“93% of Genetec’s RM205 mil current outstanding order book is related to EV and battery assembly. Total order book has exceeded FY3/2021 sales by 2.1 times.”
Other than its EV battery prospects, Genetec’s P&L (profit and loss) performance leaves much to be desired.
For its financial year ended 31 March 2021, Genetec’s net loss widened to -RM4.39 mil (FY3/2020: -RM900,000) on the back of a higher revenue of RM98.08 mil (FY3/2020: RM80.33 mil).
For its 4Q FY3/2021, Genetec remained in the red with a net loss of -RM6.01 mil (4Q FY3/2020: -RM8.2 mil; 3Q FY3/2020: +RM802,000) while its revenue stood at RM13.07 mil (4Q FY3/2020: RM8.32 mil; 3Q FY3/2020: RM32.91 mil)..
As at the end of FY21, Genetec had net cash of RM27.5 mil and RM11.6 mil of other investments. It currently has a net tangible asset (NTA) value of RM1.70/share.
As shared by the CGS-CIMB Research report, Genetec is optimistic on its financial performance from FY3/2022F onwards, backed by (i) its strong order book; (ii) its favourable positioning in the EV market segment and its involvement in developing systems and technologies together with its customers; and (iii) ramp-up in demand in the EV space from its major customers.
“Also, the company highlighted that it will be ramping up its production capacity to cater to customers’ demand while it will continue to focus on exercising prudence in terms of operational costs,” noted the research house.
UMA query
The astronomical rise in Genetec’s share price had caught the attention of Bursa Malaysia. On July 13, it was slapped with an unusual market activity (UMA) query by Bursa Malaysia – the day it hit an all-time high of RM19.46.
In its response to Bursa Malaysia’s query on the same day, Genetec said it was unaware of any specific reason behind the unusual trading of its shares apart from its recent announcement on June 17 June in relation to the new orders it secured.
“As at the date of this announcement, there is no corporate development in relation to the group’s business and affairs that have not been previously announced which may account for the trading activity, including those in the stage of negotiation/discussion,” noted Genetec.
It added that it was not aware of any rumour, report or any other possible explanation for the spike in trading activity, adding that its board confirmed that the company was in compliance with the ACE Market Listing Rules on immediate disclosure obligations.
This is the second time Genetec received a UMA query from the exchange this year. The first one was issued on 18 January.
Verdict
In his weekly newsletter column in The Observer, the Minority Shareholders Watch Group (MSWG) CEO Devanesan Evanson noted that Bursa Malaysia generally expresses its concern by raising UMA queries on listed issuers whose stock prices are scaling to dizzying heights without well-grounded reasons.
“This concern is generally accentuated when the company replies that they are not aware of any reasons which could warrant the substantial surge in price and/or volume,” he opined.
“Such replies are pieces of information that minority shareholders should consider when making their informed investment decisions. The anecdotal question that minority shareholders should ask themselves is – ‘So, what gives?’”
For Genetec, minority shareholders may wish to consider whether the industry prospects (especially the EV prospects) – and the resultant potential financial performance – warrant such optimism and astronomical rise in share price within the short time span, according to Devanesan.
Interestingly, the company’s largest shareholder and co-founder, Chen Khai Voon has been mopping up Genetec shares from the open market – upping his direct stake from 11.02% on July 1 July to 12.5% as of July 26. He also holds a 7.1% indirect stake in the company.
“MSWG would like to remind minority shareholders to exercise due diligence, given that Genetec’s stock price has skyrocketed 406% between its closing price of RM3.70 on May 31 and RM18.72 at the time of writing (July 22),” asserted the MSWG head honcho.
“Our mantra of informed investment decision making continues to be relevant.” – July 27, 2021
