A faster rollout of 5G network in Malaysia is a positive catalyst for Mestron as this would drive the demand for its specialty pole products.
KUALA LUMPUR: Mestron Holdings Bhd (Mestron) net profit for its six months ended June 30, 2021 (6MFY2021) at RM1.6 million, despite a difficult period of lockdown restriction.
This is an improvement compared to the RM790,000 in previous year corresponding period. Revenue is higher at RM22.6 million, representing a 19 per cent increase as compared to the revenue of RM19.0 million a year ago.
Despite full closure during month of June 2021, for 2QFY21, the group recorded profit of RM0.139 million while revenue increased by 39.9 per centy-o-y to RM10.97 million.
The filing with Bursa Malaysia stated that the increase in revenue was mainly due to the implementation of the Movement Control Order (MCO) back in March last year which has resulted in delay of the group’s scheduled deliveries of products for the previous financial quarter ended June 30, 2020.
The sales of higher-margin products such as specialty poles also helped to boost margin to maintain profitability during the current quarter under review.
Por Teong Eng
Mestron’s managing director Por Teong Eng said: “The strong recovery in our financial performance in the 6MFY21 is led by the strong demand for our specialty poles and the delay in some of our scheduled deliveries back in March last year following the lockdown that was imposed at that time.
“The increase in demand for our specialty poles, especially in the telco segment also helped to boost our profit margin.”
Despite the resurgence of Covid-19 cases and the reimposed MCO 3.0, Por is excited with the Group’s prospect going forward as the rollout of the 5G services in Malaysia would drive the demand for its specialty pole products as high mast and telecommunication monopole are necessary for the development of telco infrastructures.
In July 2021, Digital Nasional Bhd (Digital Nasional), the state-owned specially purpose vehicle (SPV) has announced that Ericsson will design and build its 5G infrastructure at the cost of RM11 billion.
The government has set an aim to launch 5G services by the end of this year in three cities, namely Kuala Lumpur, Putrajaya and Cyberjaya.
It will also launch 5G services in five major cities and districts in Selangor, Pulau Pinang, Johor, Sabah and Sarawak by 2022. The rollout of 5G services to cover 17 cities and rural areas is expected to commence from 2023 onwards.
“A faster rollout of 5G network in Malaysia is a positive catalyst for the group as this would drive the demand for our specialty pole products. As we have witnessed during the 1HFY21, the strong demand for specialty pole products increased our profit margin and overall financial performance.
“Given that Malaysia is one of the largest market contributing to the Group’s revenue, accounting for about 93 per cent of the group’s total revenue, the sustained demand for our specialty pole products will help to accelerate earnings growth in the near-term,” Por said.
According to Por, the group’s earnings visibility in the near-term also remains intact as seen by the healthy orderbook, in excess of 8 months turnover of the company.
Aside from that, the group will partner with Samdo Smart Solar (M) Sdn Bhd to jointly undertake engineering, procurement, construction and commissioning (EPCC) services for six solar power systems for telco towers in Malaysia. Por believes that the joint venture is expected to contribute a sustainable and recurring income stream for the group going forward.
“We are cautiously optimistic of the prospect for the group, but we can’t rule out the potential disruption from the reimposed MCO 3.0 on our production.
“This could also have an impact on the rollout of the 5G services. Having said that, the management has taken various measures to ensure the Standard Operating Procedures (SOP) implemented will minimise the risk of Covid-19 infections. We are confident that the better implementation of SOP and cost-control measures undertaken by the Group will ensure sustainable growth for Mestron Group,” Por added.