Dufu may be down for now but signs point to better things to come

Dufu Technology Corp Bhd has fallen quite a bit from its 52-week high of RM2.77 in June this year to a low of RM1.65 early November.

Financially, it does not look so rosy for the precision machining parts and components manufacturer. For 3QFY24, Dufu reported a net loss of RM3.2 million compared to a net profit of RM3.4 million a year ago.

This is despite the company posting higher revenue to RM65.89 million from RM55.24 million a year ago. This marks its first quarterly loss in almost a decade, dragged mainly by foreign exchange losses. The recent appreciation of the Malaysian ringgit (RM) against the US dollar (USD) went against Dufu as about 90% of its revenue is derived in USD.

However, Dufu is confident that the toughest phase is over, although it is still navigating the tail end of an unprecedented downturn in the storage market. Its key operational domains — precision machining of hard disk drives and production of sheet metal and stamping equipment and components — are seeing a modest increase in demand.

The technology stocks continue to thrive, buoyed by the global recovery in semiconductor sales and advancements in artificial intelligence. Meanwhile, restrictions imposed by the US on exporting advanced semiconductor technology to China are anticipated to favor local tech firms, benefitting countries like Malaysia in the Asean region through trade diversions,

In terms of price to book value rating, the stock is trading at a multiple of 2.85x based on its book value per share of 61 sen as of end-Sept. Its balance sheet is backed by net cash holdings of RM48.4 million or 9.2 sen per share) as of end-Sept.

Dufu could see a more positive financial performance given the worst might be over for the company. This should pave the way for an upturn in its share price moving forward.