Latest news with #EGIndustries
Yahoo
a day ago
- Business
- Yahoo
Will Weakness in EG Industries Berhad's (KLSE:EG) Stock Prove Temporary Given Strong Fundamentals?
EG Industries Berhad (KLSE:EG) has had a rough month with its share price down 10%. However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. Particularly, we will be paying attention to EG Industries Berhad's ROE today. Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Return on equity can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for EG Industries Berhad is: 12% = RM73m ÷ RM604m (Based on the trailing twelve months to March 2025). The 'return' is the yearly profit. That means that for every MYR1 worth of shareholders' equity, the company generated MYR0.12 in profit. Check out our latest analysis for EG Industries Berhad So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes. To start with, EG Industries Berhad's ROE looks acceptable. Especially when compared to the industry average of 5.4% the company's ROE looks pretty impressive. This probably laid the ground for EG Industries Berhad's significant 59% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio. Next, on comparing with the industry net income growth, we found that EG Industries Berhad's growth is quite high when compared to the industry average growth of 7.2% in the same period, which is great to see. The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It's important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is EG Industries Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide. EG Industries Berhad's ' three-year median payout ratio is on the lower side at 6.3% implying that it is retaining a higher percentage (94%) of its profits. So it looks like EG Industries Berhad is reinvesting profits heavily to grow its business, which shows in its earnings growth. While EG Industries Berhad has been growing its earnings, it only recently started to pay dividends which likely means that the company decided to impress new and existing shareholders with a dividend. On the whole, we feel that EG Industries Berhad's performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. You can see the 2 risks we have identified for EG Industries Berhad by visiting our risks dashboard for free on our platform here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
The Star
19-05-2025
- Business
- The Star
Strong customer base a boon for EG Industries
PETALING JAYA: Amid headwinds, RHB Research remains positive on EG Industries Bhd 's earnings moving forward, citing a strong customer profile comprising leading players in network switches and 5G photonics products. The research house highlighted that the company is the first in South-East Asia to manufacture 800G optical modules – a critical component at the front end of the artificial intelligence (AI) value chain. 'Its valuation remains attractive, with the stock trading at a low-teen forward price-to-earnings ratio. 'Margins, meanwhile, are expected to improve alongside exponential earnings growth, driven by new customer wins in the expanding AI sector,' it noted. EG Industries is the exclusive strategic manufacturer of 5G optical modules for Cambridge Industries Group (CIG) and network switches for a Chinese customer. 'As the exclusive worldwide manufacturing partner for CIG's 5G optical modules and a leading Chinese network switch provider, EG Industries benefits from trade diversion and the ongoing AI boom, as its customers shift production out of China. 'Its portfolio, featuring advanced 5G optical modules and network switches –critical components for data centres – offers significantly higher margins than its legacy products, highlighting the company's strategic focus on high-value innovation,' RHB Research added. Complementing its newly established Batu Kawan plant, EG Industries' smart warehouses in Sungai Petani provides real-time inventory monitoring and enhanced cost efficiencies. This offers compelling reasons for clients to relocate their overseas storage hubs to Malaysia, the brokerage said. In the first half of 2025 (1H25), the company achieved a commendable financial performance, posting a revenue of RM681.7mil, a 35.7% year-on-year increase from RM504.4mil in 1H24. Profit before tax nearly doubled, climbing from RM23.9mil in 1H24 to RM47.5mil in 1H25. This was supported by improved margins from a favourable product sales mix, better yields in 5G wireless access and photonics-related products, alongside a net foreign-exchange (forex) gain. EG Industries declared its first-ever dividend in financial year 2024, with a payout ratio of 9.1% of profit after tax and minority interest. RHB Research noted that key risks to the company include higher-than-expected rejection rates, supply chain disruptions, forex fluctuations and a potential loss of key customers.
