I've noticed the recent EMS sector and Semiconductor rally had left this company a laggard, a hidden gem behind the spike in the technology sector.
So when we talk about technology, in Malaysia generally we are focused on the "hardware" perspective, which our capabilities are mainly based on the manufacturing scale, as well as providing precision material to over sea clients or those who stationed in Penang. That being said, there are a few companies that excels in their own territory, MI (5286) is an excellent example of their technology on WLCSP.
So, which company we are going to discuss?
That company would be - ARB Berhad (7181) !
Now, you might hear some rumours on this company, saying that it is a con-man company, a scam company or whatsoever. But what you do not know is, the company profitability is growing despite all these haters. But let's look at the facts, or, the numbers.
In FY 2018 Q1, I believe there were some impairment activities as they shut down the timber business, or the old timber business is down due to season, however it is, not important.
As you can see, the company had completely changed and spiked in terms of revenue and profitability since FY 2018 Q2, of course as all business was affected by COVID-19 and MCO, the company in FY 2020 Q2 had a minor setback in terms of YoY growth on the bottom line.
You might think that the company that is growing in QoQ and YoY might be valued at 20, 30 times P/E ratio?
No, ARBB was valued at 3.23 P/E. WHATTTTTTT?
That is because the general investor or "ordinary investors" do not appreciate this company. And why is that so? Remember I mentioned in Malaysia most if not all technology companies focus on the hardware part? THIS company focuses on the software aspect of the technology sector!
ARBB's unique business model compromise of 2 business engine, namely the first - Enterprise Resources Planning (ERP) and Internet of Things (IoT), both are having a super rosy outlook, just check it out online.
Needless to say, ERP has become more and more important in the manufacturing world now with more resources are required to be allocated effectively. I foresee - this company could hit 8 figures in their net profit on the next quarter!
So, if you are looking at an undervalued technology company with PER of 2 to 3 times, would you choose it over a hardware company that face fierce competition but is trading at PER of 20 - 30 times? The choice is yours.