$GENETEC / 0104 (GENETEC TECHNOLOGY BERHAD) - Another Record Profit. Receivables worrying and need to be monitored. One of the most exciting companies in Bursa.
Genetec reported their Q3FY22 figures where Revenue was +98% YoY, +10%QoQ and PAT was >100% YoY, +12% QoQ. The increase in financial performance was due to higher sales volume and improved operational efficiency. Just like with @terence775, I was worried about the receivables and lack of cash flow / liquidity for the company. As retailers, we have had seen some really bad rep of late from companies with similar characteristics.
Did my round of channel checks and here are the rough summary.
1) Briefing by management attended by 70-80 institutions and analysts
2) Management aknowledged about the balooning receivables and addressed the receivable flow in the call.
3) in essence, Genetec will invoice once the goods shiped out. Once goods arrived and clear custom at customer’s port, they will get first 50%. Once the goods installed in the customer’s premise, another 30% will be paid out. Final buy off of another 20% will be received in another 12 -26 weeks. The entire 100% of payment to be paid by customer could range from 25 to 35 weeks from the date of invoice.
4) Management mentioned that the first shipment from Q1 was abit delayed due to known global factors and port congestion in California. Customer T had apparently paid RM11m and the rest of payments from Q1 billings and some from Q2 billings will be received in Feb and March. Let’s give Genetec one more quarter on this. But something to monitor closely.
Apart from this, my channel checks confirmed a few things to be excited about.
5) In the last Q, additional orderbook of RM60m was received, RM50m from EV and energy storage, RM10m from HD / electronics / semicon division.
6) Latest orderbook stand at RM198m. e mobility component is RM76m, EV / e storage is RM100m. HDD / electronics / semicon covers the rest.
7) Excited to know that part of the new orderbook is from customer T’s energy storage of their solar business. This is an extension from car battery business.
#8 Moving into FY23, there are HUGE prospects from: a) existing customer's orderbook replenishment in area of braking system and ECU
b) customer T's next order to come in 2H 2022 which could potentially double FY22 topline figure
c) Potential new orders syncing up with big MNCs from Korea and Japan in the space of big battery cell assembly manufacturers - who were apparently impressed with the company's formation line from aspects such as speed, design, cost, etc..
d) Huge potential from Thailand EV ecosystem via their recently announced partnership with APCS. Apparently potential investments here are in billions of Ringgit for grabs.
9) Acquiring a supplier, Capex of RM40m for expansion of 100k sqft
10) No shortage of engineers as they're in KL not Penang. Looking to ramp up number of engineers by another 100 in the next 6 months.
Overall, through my various channel checks, it seems that exciting times are ahead for the company. Fundamentals are slowly catching on to valuation and as mentioned in Stockbit before - there are HUGE potentials and opportunities that can be attained once you become a supply chain player to one of the most exciting companies in the world right now and this seems to be coming to fruition slowly for Genetec.
The company is also looking like it's diversifying client concentration risk, which is good. The last thing to note is to keep a VERY CLOSE watch over receivables and cash flow. If this doesnt improve next quarter - it's a BIG RED FLAG.
Company is now trading at 34x annualised FY22 number with massive growth potential. I'm staying invested.
cc: @megatzimran @SlayerBeast @justinlong @leonjakelim @niknazmirosli @andy721 @takanoamin @ValinV @facademy @zhexiangxd @cyliew @terence775 @vthamboo @eddilee11 @TrendTrading7 @weixiang98 @gibsontan @aswensingh