Today, I was talking to @leonjakelim and MJ from @FIRLGuys about potentially "hidden profit" that a company could attain / add back if they don't do or invest in R&D - of which by definition entails work directed towards the innovation, introduction, and improvement of products and processes for the betterment of the company's future. Here's some examples.

$D&O / 7204 (D&O GREEN TECHNOLOGIES BERHAD) spent RM28.2m in R&D for FY21 (around 6% of revenue). If this figure is "simply" added back to bottom line, D&O would report around RM139m of profit. Their PE valuation would drop from 48.5x to 38.5x

$AEMULUS / 0181 (AEMULUS HOLDINGS BERHAD) spent SGD1.7m in R&D in the T12M period (around 2.5% of revenue). If this figure is "simply" added back to bottom line, Aemulus would report around RM15.2m of profit. Their PE valuation would drop from 34.4x to 30x

$MPI / 3867 (MALAYSIAN PACIFIC INDUSTRIES BERHAD) spent RM51.2m in R&D for FY21 (around 2.5% of revenue). If this figure is "simply" added back to bottom line, MPI would report around RM323m of profit. Their PE valuation would drop from 26.4x to 22.2x

$SGX-AWX AEM (SGX) spent SGD13.3m in R&D for FY21 (around 2.5% of revenue). If this figure is "simply" added back to bottom line, AEM would report around SGD105m of profit. Their PE valuation would drop from 14.2x to 12.5x

$VIS / 0120 (VISDYNAMICS HOLDINGS BERHAD) spent RM5.3m in R&D for FY21 (around 11% of revenue). If this figure is "simply" added back to bottom line, VIS would report around RM15m of profit. Their PE valuation would drop from 12.4x to 8x

Other interesting companies to watch over as well are the likes of Elsoft and Vitrox. They would release their total R&D figure normally together with fully audited statements. Just for some context, FY20 R&D spent for Elsoft was about RM4.7m (FY21 profit RM11m). FY20 R&D spent for Vitrox was about RM48m (FY21 profit RM170m).

Interesting food for thought. Thanks, MJ.