Jadason Enterprises (Jadason) is an investment holding company engaged in the distribution of machines and materials for the printed circuit board (PCB) and semi-conductor industries. The group’s two main segments are equipment and supplies as well as manufacturing and support services.

Since the beginning of 2017, Jadason’s share price surged more than five times from $0.019 to $0.101 as at 1 August 2017. Could there be more upside to the current share price?

Earnings Recovery In Sight

CIMB Research recently released a bullish report on Jadason, with a target that presents an approximate 68 percent upside to the current share price. The brokerage indicated that Jadason could be headed for a strong earnings recovery over FY17 and FY18, driven by new orders from its customers. One of Jadason’s customers (which cannot be named due to non-disclosure agreements) has won large orders from a mobile device customer that is looking at a product launch, possible in the second half of this year. Jadason will be the sole provider of the outsourced PCB drilling required by the customer and short-term competition is non-existent as Jadason is not only the cheapest supplier, but also the only one that can satisfy the customer’s large capacity requirements.

Exiting The Watch-list

Jadason has been on the watch-list since 4 March 2015 pursuant to Rule 1311 of the Singapore Exchange Securities Trading Limited (SGX-ST) Listing Manual. Subsequently, the group announced on 12 April 2017 that it has received a notification from the SGX-ST that it would be granted a 12-month extension, till 3 March 2018, to meet the requirements under Rule 1314 of the SGX-ST Listing Manual for removal from the watch-list.

Last month, Jadason submitted an application to SGX-ST for its removal from the watch-list. The group had reported a consolidated pre-tax profit, excluding exceptional or non-recurrent income and extraordinary items, for FY16 and maintained an average daily market capitalisation of $40 million or more over the last 120 market days on which trading was not suspended or halted for a full market day.

Net Cash

Despite Jadason being in the red in four of the past five years, the group still maintains a net cash position of $5.9 million or $0.008 per share.

Given Jadason’s current balance sheet position, should there be an earnings recovery, there could be a possibility of dividends to reward shareholders in the future.

However, due to the significant increase in share price this year, we advise investors to exercise caution when trading in Jadason’s shares.