$GENETEC / 0104 (GENETEC TECHNOLOGY BERHAD)

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GENETEC 1QFY25 briefing keytakes (Zoom)

*Date: 27 Nov 2024*

*Management: KW Chin (MD), KH, Chua*

*Key takeaways*

- 1QFY25 revenue RM40.2m, -22% qoq, 5QFY24, due to delay by end customer.
- GPM of 18.2% closely in line with 5Q’s quantum. Cost management in place – reduced overall travelling costs and repair maintenance costs.
- PBTM -3.9ppts to 10.9% while PATAMI -7.7ppts to 11.9%
- EV at 97% at RM39m, electronics 3%
- Anticipate EV & energy and Electronics to continuing drive up orders
- The worst of US presidential election uncertainty is behind the group.
- Book orders to improve from here
- Group cash balance at RM124m, low gearing of <0.1x
- Proposed disposal of 51% in CLT Engineering – disposal of 6.2m shares for cash of RM21.6m. Gain on disposal of RM0.3m,
- Rationale behind the disposal: Declining revenue and unsatisfactory finance performance, and to realise the value of investment in CLT and focuses its resources to relatively higher profitability. Completion expected by Mar25.

*Business development and outlook*

- Period of uncertainty is behind the group
- Projects that have put on hold previously, have now resumed
- Received a lot of RFQ and RFP on tight deadline. Busy submitting proposals.
- Future is promising on the showcase of self-driving vehicles.
- German clients have also shared its 2025 roadmap to the group.
- North America and Europe clients to drive growth i.e. Cybercab to be launched in 2026.
- The group has successfully unlocked various segments with its clients i.e. manufacturing processes, vehicle assembly for major electronic components for EV and European clients.
- Orderbook stands at RM204m with 80:20 – North America:European. Expect orderbook to strengthen.
- BESS beginning to gain traction, and got shortlisted with a few MY players.
- Seeing new interest in BESS to tie with solar under CRESS for corp clients in DC. Management has high conviction that it will win orders here.
- Deferred orders are catching up.
- Cautiously optimistic to mid-to-LT prospects.

*Q&A*

- During last Q briefing, management guided that the pipelines remain resilient, just a timing issue instead of cancellation. And now with the uncertainty went passed, management expect deferred orders to catch up.
- EV and energy segments will continue to be the main drivers for the group.
- Demand for manufacturing automation solution will grow.
- Priority is to retain clients, deepens involvement, broaden client base. Manufacturing processes, assembly for major electronic components.
- European is the leader for the EV + hybrid cars with >160 production locations across 30 countries
- Optimistic on the EV market, seeing a strong push towards expediting EV roadmaps.
- Fast and furious quarters ahead to catch up on the deferred orders
- Forex – there will be natural hedging in place on top of hedging.
- Expansion progressing as planned.
- Outlook on its BESS – gaining traction and building track record. Potentially recurring orders from its international clients. Gaining interest in pairing BESS with Solar under CRESS.
- The proposed disposal is purely on streamlining operations and to focus better on growth. And this should not affect its operations. Cash proceeds will be used for future funding and working cap.
- Getting into new areas of existing clients, car assembly + EV components.
- Genetec will be the key beneficiary on the new EV regulations push through.