Mestron takes a close pole position in share price recovery

Mestron Holdings Bhd breached its resistance level of 30.5 sen on August 15 to touch an intraday high of 32 sen. In the past 5 days, Mestron has jumped 22%.

However, there is a room to grow before it can move towards its year high of 58 sen last September. The pole maker offers various pole products such as street lighting pole, decorative pole, camera pole, telco monopole, traffic pole and oil and gas and mining light pole.

However, investors could be jittery when the counter’s intraday short selling (IDSS) was suspended in January. This was after its last done price dropped more than 15% or five sen from its reference price. Prior to its steep decline, the counter had risen 6.82% year-to-date from 44 sen.

The pole maker posted a net profit of RM3.57 million in the third quarter ended Sept 30, 2023 (3QFY2023), a 6.66% decrease from the RM3.35 million a year ago. Its performance was dragged by lower sales demand for specialty poles and lanterns.

Quarterly revenue rose 11.53% to RM41.44 million in 3QFY2023 from RM37.16 million a year ago. In the latest quarter 1Q results ended Mar 31, 2024 Mestron saw a slight decline in its net profit to RM2.1 million from RM2.6 million a year ago. This is despite posting higher revenue of RM29.8 million versus RM26.9 million.

Good thing is that it managed to generate a positive net cash from operations of RM10.6 million versus a huge deficit of RM38 million in the previous quarter.

The increase in revenue was mainly due to an increase in the sales demand for standard and decorative poles in 1Q24. Mestron derives its revenue mainly from the manufacturing segment which accounts for 77.5% of the total revenue in 1Q24. The Malaysian market remains as the largest market contributing to its revenue accounting for 91.5% of the total revenue.

Overall, the company registered a lower net profit mainly due reduction in the sales demand for specialty poles, telecommunication poles and lanterns which generally command higher sales margin.

It remains to be seen if Mestron can achieve better sales and bottom line in subsequent quarters but the 5G play could provide it the much needed catalyst.