ATA IMS sees bright light as it surges past 2-year high

ATA IMS Bhd has started to surge above its 2023 highs over the past 3 weeks or so. ATA IMS provides electronic manufacturing services, offering engineering, mould design and fabrication, plastic injection moulding, and filter manufacturing services.

The company has been languishing at its low since it lost its biggest customer, home appliance maker Dyson few years ago. As a result, ATA IMS has been in the red for the past three financial years but managed to narrow its losses recently.

The stock was once trading at over RM3 a piece, but plunged to below RM1 since Dyson terminated the company as its supplier in June 2022. This was following an audit of the company's labour practices, which ATA IMS denied allegations of labour abuse. News of the termination was first reported in November 2021, and its share price has not recovered to its previous levels.

Datuk Seri Foo Chee Juan, is ATA IMS' largest shareholder, holding a direct 0.11% and an indirect 33.97% via Oregon Technology Sdn Bhd. Other substantial shareholders include Datuk Fong Chiu Wan with a direct 26.28% stake, and Datuk Balachandran Govindasamy with a direct 0.82% and an indirect 7.15% held through PP Tech Ltd.

For the financial year ended March 31, 2024 it managed to trim its net loss to RM104.9 million from RM254.54 million in the previous year, due to lower impairment of goodwill, plant and equipment, and lower provision for slow-moving stocks. Revenue fell 56.3% to RM399.81 million for FY2024 from RM915.78 million in the previous year.

The company is dragged by various legal suits against its subsidiaries. Its wholly-owned subsidiary, ATA Industrial (M) Sdn Bhd (AIM), is being sued by a motor supplier over a US$4.44 million (RM19.85 million) claim.

The Johor-based electronic manufacturing services group said the amount claimed by Johnson Electric Industrial Manufactory Ltd from AIM consists of payment for finished goods, payment for raw materials, storage costs and testing fees.

One of its units were hit with a RM2.57 million suit from Intag Industrial Supplies Sdn Bhd and a month later, another subsidiary was hit with a suit from the industrial tapes and adhesives supplier, involving a RM27.55 million claim.

Intag filed the suit against ATA IMS’ wholly owned subsidiary Jabco Filter System Sdn Bhd, claiming the aforesaid amount for payment of goods.

ATA IMS said Intag supplies goods to Jabco based on a major customer’s order forecasts. ATA IMS noted that on Dec 23, 2022, the major customer terminated its business contract with effect from March 31 this year.

Recall that the counter rallied for eight trading days last February but succumbed to profit taking skidding over 20%.

This time, investors should be wary and not caught buying on the uptrend of ATA IMS shares and not quick enough to liquidate when they falls.