Integrated electronics manufacturing services provider Jubilee Industries Holdings (Jubilee) saw earnings more than tripling to $3.3 million in its latest FY19 results.
Revenue increased marginally by 2.3 percent to $163.7 million from $160 million a year ago. The increase in revenue came on the back of the group’s mechanical business unit (MBU), which saw contribution more than doubling to $18.7 million, following the acquisition of Honfoong Plastics Industries (Honfoong).
The acquisition also boosted Jubilee’s fleet of precision tooling machines, from a mere 27 units to 118, and further expanded the group’s manufacturing footprint to Batam, Indonesia. In addition, it also helped Jubilee’s MBU to position itself towards higher mix of better-margin products, especially in the medical and automotive industries.
On the other hand, Jubilee’s electronic components distribution business unit (EBU) saw a slight drop in revenue, from $151.8 million to $145 million. The group attributed lower revenue to softening demand for some products, arising from trade war uncertainties and the global semiconductor downturn.
Nonetheless, the group’s EBU was the contributing factor that propped up profitability. In FY19, the group’s gross margin improved 4.8 percent to 7.7 percent, lifted by the EBU which saw segmental gross margin improved from 4.3 percent to 7.5 percent. Conversely, the MBU saw gross margin taper off from 13.4 percent to 9.2 percent during the same period.
Management addressed that lower gross margin in the MBU was a result of underutilization of machines and high manufacturing overheads related to Honfoong. Meanwhile, the EBU’s higher gross margin arose from group’s focus on higher margin product mix, better management on logistics, manufacturing and distribution costs and effective procurement strategies.
While current weak demand for electronic components, coupled with US-China trade war, meant that the semiconductor market may not recover anytime soon, Jubilee’s EBU is still poised to ride on the secular demand growth for optic components and robust mobile DRAM market. This will be underpinned by the demand in high-growth markets such as artificial intelligence, cloud computing and Internet-of-Things (IoT), as well as the highly anticipated 5G technology.
Following its impressive earnings performance for FY19, Jubilee is proposing to consolidate every four existing ordinary shares into one ordinary share. According to management, the consolidation of the shares will potentially help to reduce the share price volatility and improves market interest and attractiveness for the stock.