D&O Green Technologies Bhd has been on a winning streak, securing a spot on The Edge Billion Ringgit Club (BRC) corporate award winners’ list for the third consecutive year. The Melaka-based automotive light-emitting diode (LED) manufacturer clinched its first BRC award in 2021 by emerging as a joint winner in the technology sector for the highest growth in profit after tax over three years. In 2022, D&O bagged the BRC award for highest total returns over three years in the technology sector, a feat that the group successfully retained this year.
The company’s share price surged from 53 sen on March 31, 2020, to an all-time high of RM5.97 in September last year, before settling at RM4.32 on March 31 this year, the cut-off date for BRC membership and award evaluation for 2023. Over the three-year period from March 31, 2020, to March 31, 2023, D&O’s share price skyrocketed over eight times, with a compound annual growth rate (CAGR) of 101.25%. However, it’s worth noting that year to date, the counter had fallen 23% to close at RM3.31 on Oct 6.
D&O’s main operating subsidiary, Dominant Opto Technologies Sdn Bhd, has a workforce of 2,700 and a presence in major automotive markets worldwide, including China, Europe, the US, Japan, South Korea, and India. The company stands out as one of the few global automotive LED makers offering a full range of colour spectrum and brightness intensity, catering to both interior and exterior applications in vehicles.
Notably, Goh Nan Kioh, the executive chairman of Mega First Corp Bhd, holds the largest stake in D&O with 30.35%, followed by his wife Lim Yam Chiew, who owns 9.3% of the company. D&O’s non-executive chairman, Tan Sri Mohammed Azlan Hashim, and his wife Puan Sri Nonadiah Abdullah collectively hold an 8.01% equity interest in the company. The Employees Provident Fund (EPF) also emerged as a substantial shareholder of the LED maker, acquiring a 5.06% stake on Sept 25 and increasing its shareholding to 5.25% on Oct 3.
In a report dated Sept 6, analysts at Public Invest Research maintained an “outperform” recommendation on D&O with an unchanged target price of RM4.37, pegged at 35 times earnings per share in FY2024. They expressed confidence in the company’s potential for a strong comeback in the second half of the year, driven by a sequential recovery in automotive LED sales and margins, particularly in the China market, which contributes about 45% to 50% of the group’s revenue.
With the government’s reported pledge of more stimulus measures to boost car demand, D&O’s management remains optimistic about achieving high single-digit sales growth for FY2023. Additionally, the company is in discussions with a well-established car maker from South Korea and has secured its first design win for smart projection LED in the global automotive LED industry, with an estimated annual sales of over RM15 million for the new electric Mini Cooper.
Furthermore, D&O’s groundbreaking physical chip, which combines analogue, digital, and memory functionality, is in the final stage of package qualification and is expected to be rolled out by the end of November. Between the financial year ended Dec 31, 2019 (FY2019) and FY2022, D&O’s earnings achieved a three-year CAGR of 17.5%, growing from RM34.87 million to RM75.15 million.
In its 2022 annual report, D&O acknowledged a decline in profit from RM110.53 million in FY2021 to RM75.15 million in FY2022, attributed to the sharp devaluation of the ringgit from a foreign exchange perspective. The company took proactive steps to rebalance its currency exposure to mitigate the impact of future foreign exchange volatility on its operations and balance sheet, resulting in a substantial reduction in the impact of currency fluctuations towards the end of the year.
Successful measures to mitigate market volatility and continued investments in research and development position D&O for further success.
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