Since the successful acquisition of Supercomal Medical Products Sdn Bhd (SMP) in October 2017, Supercomnet Technologies Berhad (SCOMNET, 0001) has consistently shown a trend of continuous growth in its performance, even reaching new highs in the third quarter of the 2022 fiscal year.

Before delving into the latest performance released by SCOMNET a few days ago, let's briefly comprehend the background of the company. According to the company's official website, SCOMNET was established on May 10, 1990, and listed on the Malaysian Stock Exchange's ACE Market on April 30, 1999. The company's primary business includes the manufacturing and assembly of medical devices, electrical appliances, consumer electronic products, and automotive wires and cables.

The business is operated by three wholly-owned subsidiaries under SCOMNET. The first subsidiary is Supercomnet Technologies Berhad (STB), responsible for producing various custom cables and wire products for original equipment manufacturers in the automotive, electrical, and other industries. The second subsidiary is Supercomal Advanced Cables Sdn Bhd (SAC), primarily involved in the manufacturing and assembly of fuel tanks, wires, and cables for the automotive industry. The last one is SMP, as mentioned earlier, which is responsible for the manufacturing and assembly of medical-related cables and equipment.

According to the 2022 annual report, the main source of SCOMNET's revenue comes from SMP's business, accounting for approximately 62.00% of the total revenue for the 2022 fiscal year. This is followed by the businesses of STB and SAC, accounting for approximately 28.00% and 10.00% of the total revenue, respectively.

Although SCOMNET has a wide range of customers worldwide, Malaysia remains the company's primary market, representing around 61.62% of its revenue for the 2022 fiscal year. The Dominican Republic (24.52%), the United States (9.05%), Denmark (2.63%), Singapore (2.90%), and Taiwan (0.09%) are the next significant markets.

For information, most of SCOMNET's cable products related to automotive and consumer appliances are sold to Malaysian customers, while medical-related cables and pipeline products are primarily exported overseas.

Now, let's explore the performance of SCOMNET's latest quarterly results (Q1FY2023).

Revenue Comparison (YoY +3.89%, QoQ +0.05%)

For the first quarter ending March 31, 2023, the company's revenue was approximately RM37.37 million, showing a year-on-year growth of about 3.89% and a quarter-on-quarter growth of 0.05%. This is mainly attributed to increased revenue contribution from the automotive sector.

According to research, the revenue from the automotive sector benefited from supplying wire and fuel tanks for the Peugeot 2008, 3008, and 5008 models to Stellantis.

Net Profit Comparison (YoY -5.13%, QoQ +15.27%)

Due to the soft contribution from the medical sector in this quarter caused by a decline in demand for endoscopy video cables used in the treatment of COVID-19, the company's net profit decreased by approximately RM0.38 million or 5.13% year-on-year, to around RM7.02 million. Additionally, increased labor costs and electricity prices also affected the company's profitability.

However, compared to the previous quarter, the net profit increased by approximately RM0.93 million or 15.27%. This increase was driven by higher sales of medical-related products with higher profit margins. Therefore, the company's profit margin for this quarter improved from 16.30% in the previous quarter to approximately 18.79%.

It is worth mentioning that SCOMNET also announced the distribution of a final dividend of RM 0.0150 during this quarter, with an ex-dividend date of June 22 and payment date on July 18, 2023.

Outlook

The company is currently undergoing factory expansion plans, with a planned capital expenditure of approximately RM25.00 million over the next three years to construct a new five-story facility for the production of new medical products. Once completed, the company is expected to add 12,000 square meters of production capacity.

Meanwhile, the company has submitted an application to transfer to the Main Market to institutions such as the Malaysian Investment Development Authority (MIDA) and the Ministry of International Trade and Industry (MITI). Therefore, SCOMNET is expected to transfer to the Main Market within this year.

So, how do readers view SCOMNET, which currently has a price-to-earnings ratio of approximately 31.23 times?