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Hong Chew Eu
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Retired Group CEO of i-Bhd. Now a full time blogger
SunCon: Sustainable Growth, But Will ROE Catch Up?
Sunway Construction Group Berhad (SunCon) is Malaysia’s leading integrated construction and engineering group. Its vertically integrated model ensures cost efficiency and quality, particularly in complex projects.
A key strength is its early shift toward sustainability. Through its Sustainable Energy Services division, SunCon delivers solar, district cooling, and energy-efficient infrastructure. SunCon also embeds digitalisation and circular economy practices to cut waste and enhance ESG performance.
It has evolved from a traditional contractor into a future-ready partner focused on sustainable, smart, and energy-efficient infrastructure.
While this changes has driven revenue to double from 2019 to 2024, ROE only grew by 8%.
Part of this was due to margin compression. For example, gross profit margin decreased from 21% in 2019 to 14% in 2024. Another reason was the increase in the capital to fund the growth. Total equity increased by 30% over the same period.
Given this picture, you should not be surprised to find Suncon been mapped onto the border of the Gem and Quicksand quadrants in the Fundamental Mapper.
Can the declining ROE be turnaround? The potential for SunCon’s ROE to improve depends on its shifts toward higher-margin, value-added projects like green buildings and energy infrastructure.
Recurring income from solar and district cooling assets will also enhance earnings without significantly increasing equity. At the same time, digital tools and cost-efficiency measures could drive margin recovery. With capital intensity stabilizing, these developments could led to a gradual but sustainable ROE uplift. Only time will tell.
Frontken: Squeaky Clean Profits, but ROE Needs a Polish
Frontken Corporation Berhad is a leading service provider specializing in advanced precision cleaning, surface treatment, and maintenance of high-value components for the semiconductor and oil & gas industries.
Over the past six years, it has been riding a pretty sweet growth wave - revenue grew at a solid 11% CAGR, thanks to booming demand in semiconductors, smart capacity expansions, and a nice little comeback from its oil & gas business.
Profits shot up even faster, with PAT growing at 15% CAGR. That is the magic of doing more high-value work, keeping costs in check, and squeezing more out of each dollar, particularly in its powerhouse hubs of Taiwan and Singapore.
But here is the twist. Despite raking in more profits, ROE barely budged, moving from 20.0% in 2019 to just 20.7% in 2024. Why?
Well, Frontken has been playing it safe - retaining lots of earnings, issuing new shares from warrant conversions in 2024, and keeping its balance sheet squeaky clean. All great for stability, but not exactly ROE fuel.
Still, on the Fundamental Mapper, Frontken shines bright, sitting proudly to the right with its strong business performance. But… maybe just a little too bright for the market’s liking. With its stock price possibly outpacing its fundamentals, it is landed in the Gem quadrant—sparkling with quality, but perhaps already fully admired.
Greatech Technology Berhad has spent the past six years scaling up impressively - transforming into a global automation powerhouse serving industries like solar, semiconductors, EVs, and life sciences. Revenue grew 3.5 times, and profit after tax tripled.
This was not luck. It was the result of bold moves: entering new markets, diversifying its customer base, and investing heavily in capacity, talent, and acquisitions.
But while the business grew bigger, shareholder returns told a different story. Return on equity was cut in half - not because of new shares, but because retained profits swelled the equity base while profit growth lagged behind revenue. Heavy upfront investment in new factories, people, and subsidiaries also weighed down margins in the short term.
Now, Greatech finds itself at an inflection point - straddling the edge between the Quicksand and Gem quadrants in the Fundamental Mapper. To overcome this predicament – growing revenue with declining ROE - the strategy must shift from expansion to execution. That means making better use of the infrastructure already in place, focusing on higher-margin, repeatable projects, and tightening cost control.
The challenge ahead is clear - turn scale into efficiency, and growth into stronger returns. If Greatech can do that, it won’t just be a leader in automation – it will be a high-performing business delivering real value to shareholders.
Burned Out? Why Elsoft’s Test Equipment Business Needs a Reboot
Once upon a time, Elsoft Research Berhad was riding high, churning out test and burn-in systems like nobody's business. These clever contraptions found eager customers in the booming world of smartphones and shiny gadgets. Life was good.
But then came 2019. Demand for LED flash testing started drying up as smartphone makers got a little too comfortable with “good enough,” and product designs moved on. And just when Elsoft was wondering what else could go wrong, along came COVID-19, slamming the brakes on capex and shipping schedules. Revenue took a nosedive.
In 2021 and 2022, things perked up a bit - thanks to delayed orders finally getting delivered and customers emerging from lockdown hibernation. But this was a short lived rebound. The core smart device segment never came back, and Elsoft’s newer bets - like automotive and medical test equipment - were still warming up on the sidelines.
Today, Elsoft sits in what we’d call the “Quicksand quadrant” in the Fundamental Mapper It is not sinking dramatically, but it is definitely stuck. The company is making all the right noises - more R&D, new markets, a pivot to EVs and medical devices - but real growth is still a work in progress. Until those bets pay off, Elsoft’s story is less “comeback kid” and more “patient in rehab.”
KESM Industries Berhad is principally engaged in burn-in and testing services for the semiconductor industry. It is recognized as the world's largest independent burn-in and test service provider, primarily serving global semiconductor manufacturers.
However, KESM’s revenue declined 20 % from 2019 to 2024. According to the company, the revenue decline was not due to market loss or obsolescence, but rather a strategic pivot into higher-value segments (EV and AI), hindered by macroeconomic disruptions and long product development cycles.
But the turnaround signs in 2024 suggest that the business may be at an inflection point.
• Revenue rose 6 % in 2024 compared to that in 2023. This marks the first year-on-year growth since 2021.
• After a net loss in 2023, KESM recorded a modest net profit of RM0.2 million in 2024.
• KESM noted improvements in the automotive semiconductor demand, especially for EV applications
• The company is seeing rising orders for advanced power management chips used in AI systems, a new but rapidly growing vertical.
In short, 2024 marked a bottoming out and a pivot toward recovery. While the profit was still minimal, the operational and strategic indicators point to early-stage momentum that could accelerate if EV and AI testing volumes continue to grow.
Over the past six years, Unisem (M) Berhad has evolved from a cost-focused OSAT player into a technology-driven, sustainability-aligned enterprise.
This transformation involved embedding ESG principles and digitalisation into its operations, expanding its role to a collaborative innovation partner, and investing in modern, environmentally sustainable facilities.
Despite this strategic shift, there was no sustained uptrend in profits from continuing operations. While profit after tax in 2022 was approximately three times higher than in 2019, by 2024 it had declined to a level below that of 2019.
Operationally, there was little improvement in profit margins over the six-year period, although the Selling, General and Administrative margin remained stable. As a result, ROE declined at 12 % per year compounded over the period.
According to the company, this performance stems primarily from cyclical demand weakness, underutilised capacity, and cost escalations. These challenges have masked the operational improvements and technology investments the company has made.
However, its capacity investments, customer alignment, and cost control suggest it is well-positioned to rebound once demand normalizes.
To track Unisem’s recovery, investors should watch for rising semiconductor demand and improved plant utilisation. Margin and ROE improvement would signal better cost absorption and capital efficiency. New customer wins and progress on technology and ESG goals would further support a sustainable rebound.
Globetronics’ revenue has halved over the past six years, with PAT falling from RM46 million in 2019 to RM11 million in 2024.
While gross margins held up, the shrinking topline meant fixed costs weighed more heavily on profits. The company attributes the decline to lower customer volume loadings, its exit from the quartz timing business, and COVID-related disruptions.
But the deeper issue is this: new products have not scaled fast enough to replace legacy lines. In a tech-driven industry, that is a serious concern. Globetronics’ own disclosures cite softening demand and reduced volume from key customers, but offer little mention of successful new product rollouts or major customer wins.
This absence is telling. Over several years, the company has explained revenue weakness through external factors, yet there has been no concrete sign of innovation-led growth. In a sector where new product milestones are typically highlighted, this silence suggests execution gaps in product development and commercialization.
This is the heart of Globetronics’ challenge. In tech, if new doesn’t grow, old revenue goes. A sustained turnaround will depend on the company regaining its ability to bring new, scalable products to market.
Its position in the Turnaround quadrant in the Fundamental Mapper reflects this fundamental issue.
Over the past six years, Inari Amertron Berhad has achieved a 4 % CAGR in revenue while PAT grew at a double rate of 8% CAGR.
This stronger PAT growth, however, did not stem from improved cost leverage or margin expansion. As noted in the 2024 annual report, “the Group’s administrative expenses rose in line with revenue,” indicating no significant improvement in fixed cost efficiency.
Despite growing profits, Inari’s ROE fell from 18% in FY2019 to just 10% in FY2024. This decline reflects an outsized expansion in capital relative to earnings. For instance, between FY2019 and FY2024, total assets and shareholders’ equity rose at CAGR of 18 % –19%, well above the 4% revenue CAGR.
The company’s growth trajectory is also marked by a high concentration of revenue from a single customer. As disclosed: “approximately 90% of the Group’s revenue is derived from one major customer.”
This underscores a key investment risk, especially in a sector where technological shifts and client decisions can swiftly alter demand.
Taken together, Inari exhibits the financial strength typical of companies in the Gem quadrant of the Fundamental Mapper. However, its declining ROE and high customer concentration suggest elevated investment risk, even in the presence of profit growth.
Growth Without Profit? Mapping D&O's Strategic Reset
D&O Green Technologies is a vertically integrated automotive LED solution provider, evolving into a one-stop platform for smart automotive lighting systems. A key innovation is its seddLED - the world’s first smart digital automotive LED that integrates both LED and IC within a single package.
Over the past six years, D&O achieved a 13% CAGR in revenue, yet PAT grew at only 2% CAGR. This discrepancy is largely due to a significant decline in gross profit margin, which dropped from 28% in 2019 to 20 % in 2024, although partially offset by improved Selling, General, and Administrative efficiency.
The margin erosion stemmed from several factors - less favourable product mix, rising input costs, higher depreciation and overhead, industry pricing pressure and foreign exchange volatility.
These structural and external challenges weighed on profitability, despite strong topline performance. It is no surprise, then, that ROE in 2024 is roughly half of what it was in 2019.
However, the outlook is not entirely bleak. While gross margins remain below historical levels, D&O’s strategic pivot toward higher-margin products, deeper vertical integration, and sustained investment in automation are showing early signs of a turnaround.
A sustained recovery will hinge on scaling production volumes, cost stabilization, and market acceptance of its advanced offerings. Given this context, it is clear why D&O falls into the Turnaround quadrant in the Fundamental Mapper.
If you are looking for deeper investing insights into the semiconductor sector on Bursa, don’t miss our upcoming podcast on 5 June — “AI & Global Demand: Fueling the Next Chip Rally?” — where we explore investing opportunities for Malaysian semiconductor stocks.
JHM’s Inflection Point: Signs of a Turnaround Ahead?
JHM Consolidation Berhad is a one-stop engineering and manufacturing solutions provider serving the automotive, industrial, semiconductor, and telecommunications sectors.
It supports the semiconductor sector at the upstream level by supplying precision mechanical parts for semiconductor equipment. It also produced hermetic enclosures and connectors used in semiconductor modules, and assemble electrical and optical modules for semiconductor and industrial applications.
Over the past six years, JHM’s revenue has declined at a compounded rate of approximately 2% annually. This decline was driven by reduced orders from key automotive customers, the lingering effects of the COVID-19 pandemic, supply chain disruptions, delayed project launches, and rising input and labor costs.
As such from a profitable position in 2019, JHM slipped into losses in 2024. The decline was exacerbated by a narrowing gross profit margin and higher Selling, General, and Administrative expenses. These structural pressures challenged operating leverage, despite capacity expansion initiatives.
However, 2024 may mark the bottom. The Q1 2025 results indicate revenue improvement and a narrower loss. Additionally, JHM reportedly secured a contract to supply automotive parts to the U.S. and is exploring EV battery pack assembly - initiatives that could support a turnaround and eventually improve its position in the Fundamental Mapper.
If you are looking for deeper investing insights into the semiconductor sector on Bursa, don’t miss our upcoming podcast on 5 June — “AI & Global Demand: Fueling the Next Chip Rally?” — where we explore investing opportunities for Malaysian semiconductor stocks.
