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Automotive technology grows, develops and innovates-Betamek (KLSE: 0263)

Catalysts

1. Betamek (KLSE: 0263) operates in the electronics manufacturing services for automotive markets in Malaysia where vehicle sales were up 6.6% 1H24.

2. Increase in electric vehicles (EV) sales, doubled in 1H24.

3. Acquisition of electronic components manufacturer Sanshin Malaysia Sdn. Bhd.

4. Completion of joint venture with Shenzhen Zhonghong Technology Co., Ltd., an R&D automotive electronics company.

Industry Tailwinds

• Strength from the U.S. and China should trickle into the Malaysian economy. The Malaysian economy is on track with a 4.2% growth rate in 1Q2024.

• Passenger vehicle sales in Malaysia up 9.2% from previous year.

• Betamek has been a 30 year partner of Perodua

Industry Headwinds

• With the recent Malaysian Budget release, petrol incentives which are scheduled for sunset, could adversely affect the automotive segment. Supply chain issues are always a concern for the manufacturing businesses; with continuing global conflicts jeopardizing strategic shipping lanes.

Financial Metrics

1Q24 Revenue-50 mm

1Q24 EPS-0.011

Assumptions

Where do you think revenue will be in 5 years time? and why?

Revenue in 5 years will be RM569 mm from a growing automotive segment in Malaysia.

Where do you think earnings will be in 5 years time? and why?

Earnings in 5 years will be RM50.1 mm from the diversification of revenue streams from mergers and acquisitions. Should other partnerships with automakers evolve this will also increase earnings.

Risks

• Hedge for foreign currency fluctuation; USD, SGD, CNY.

• The cost meeting ESG regulations as a manufacturer, could impact the businesses waste handling and disposal, carbon output, and energy consumption.

• Reliance on a single automotive group proved lucrative; but is a point of failure should the group experience a downturn.

• Increased competition from multinational and local companies.

• Global supply chain restraints

• Diminished skilled labor pool

• Consistent knowledge acquisition of technological advancements

Valuation

3-Year Outlook

Revenue: 329 mm

Earnings: 29 mm

5-Year Outlook

Revenue: 569 mm

Earnings: 50 mm

10-Year Outlook

Revenue: 1,400 mm

Earnings: 125 mm

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Disclaimer

The user Hoomakaukau holds no position in KLSE:BETA. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Disclaimer

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