KESM to increase factory capacity in Melaka

By AZALEA AZUAR

KESM Industries Bhd is expanding its manufacturing capacity in anticipation of higher demand for semiconductor content from electric-vehicle (EV) manufacturers.

In a filing to Bursa Malaysia yesterday, KESM noted that it would invest in a new factory space of over 100,000 sq ft in Melaka to support future growth in burn-in and test of automotive semiconductors.

KESM executive chairman and CEO Sam Lim said the company is taking a long-term view that the global car market will turn around and continue to grow despite the pandemic headwinds.

“The reliability of semiconductors for the safety of cars has and will always be the top concern for all new car designs.

“Many governments around the world are harnessing the support for reduced emissions from cars. Therefore, we remain confident the EV revolution is speeding up and KESM is ready to ride in this fast lane,” Lim said in a statement.

He said the move towards EVs and autonomous vehicles will see increased semiconductor content per vehicle. KESM serves the top five of the 10 largest car semiconductor manufacturers in the world.

Lim said while the company was hit hard by the significant drop in production volumes last year, their balance sheet remains strong as its cash position has strengthened from RM200 million to RM230 million.

The company declared an interim dividend of 1.5 sen per ordinary share, totalling RM600,000 on Aug 25, 2020.

The board has proposed a final tax-exempt dividend of six sen per ordinary share, approved during its AGM yesterday. Collectively, these two dividends totalling 7.5 sen provided a high dividend payout ratio in spite of a weak performance.

Lim acknowledged that the global car market weakened significantly last year though the rise in semiconductor content used in cars kept its resilience when production volumes declined.

“We faced the biggest challenge when our customers and ourself could not be rescued from the unprecedented global Covid-19 pandemic, which is still far from over,” he said.

Lim hopes to see a swift recovery rate in KESM’s business activities when the pandemic restrictions loosen.

“KESM operates in a highly capitalised market. With their strong financial health, they are taking the opportunity of this uncertain period to invest in training, upgrading their equipment to benefit from the growing global automotive industry when the chips are up,” he said.

KESM fell 18 sen or 1.35% to close at RM13.20 yesterday, valuing the company at RM567.79 million.