MPI shares tumble 10 pct in a week amid Wolfspeed bankruptcy concerns

New Straits Times

6 days ago

KUALA LUMPUR: Shares of Malaysian Pacific Industries Bhd (MPI) slid about 10 per cent over the past week to close near RM18.00, amid reports that key silicon carbide (SiC) customer Wolfspeed Inc. may be preparing to file for Chapter 11 bankruptcy protection, said CIMB Securities Sdn Bhd.
The reports, first published by Reuters and The Wall Street Journal, suggest that Wolfspeed is seeking to restructure its debts under court supervision while maintaining operations. This development sparked market concerns over possible supply chain disruptions for MPI.
Despite the market jitters, CIMB noted that, based on its channel checks, MPI is still receiving SiC wafer volume loadings from Wolfspeed, indicating no immediate supply disruptions.
"We believe the impact on MPI would be limited, as Wolfspeed is estimated to account for less than 5 to 6 per cent of the group's FY6/24 revenue. Importantly, MPI appears to have the operational flexibility to mitigate any potential fallout, with the option to reallocate floor space to other customers, such as Infineon, to support the ongoing ramp-up of new power module packaging at its Carsem S-site facility."
This strategy, CIMB added, should help cushion MPI from any delays in Wolfspeed's restructuring process.
The firm has reiterated its 'Buy' rating on MPI with an unchanged target price of RM30.00, based on a 25x CY26F P/E, which is two standard deviations below the OSAT sector's mean.
"We continue to favour MPI for its unique SiC and gallium nitride (GaN) exposure and favour it as a proxy for the growing demand for power semiconductors in data centres. The group also has a strong balance sheet with a net cash position of RM990 million (RM4.72/share) as of end-Mar 2025," the research house said.
CIMB Securities has pointed out several reasons why Malaysian Pacific Industries Bhd (MPI) could see its value increase, such as a quicker recovery at Carsem Suzhou (CSZ), gaining new customers and designs in the fast-growing SiC and GaN areas, a faster bounce back in the automotive and electric vehicle (EV) markets, and the chance of a bigger dividend payout.
However, the research house cautioned that downside risks remain, particularly a slower sector recovery, delays in new capacity expansions, and unfavourable currency movements, especially if the ringgit continues to strengthen against the US dollar.
In its latest quarterly update, MPI reported a 2 per cent quarter-on-quarter (QoQ) dip in revenue for 3QFY6/25, primarily due to sales contractions in Asia (-5.7 per cent) and Europe (-7.4 per cent). This decline was partially offset by a robust 23.5 per cent QoQ rebound in US sales, driven by sustained demand for power packaging solutions at Carsem Malaysia (CSM).
The company's operational strength was further reflected in a 20 per cent rise in minority interest expense, indicating stronger performance at CSM.
For the nine-month period ended FY25 (9MFY25), MPI's revenue in US dollar terms grew 5.5 per cent year-on-year (YoY) to US$354 million, supported by improved contributions from Asia and Europe. However, in Ringgit Malaysia terms, revenue growth was modest at 0.3 per cent YoY, held back by foreign exchange losses stemming from the ringgit's appreciation. This led to a realised forex loss of RM16.9 million during the period.
Despite these currency headwinds, MPI delivered a 35 per cent YoY surge in net profit to RM110 million, largely driven by the turnaround at CSZ, a testament to the group's resilience and operational agility in navigating a volatile macroeconomic environment.