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Hong Chew Eu
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Retired Group CEO of i-Bhd. Now a full time blogger
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.
CSC Steel Holdings Berhad is one of the more prominent cold-rolled steel producers in Malaysia. The company is majority-owned by China Steel Corporation (CSC) of Taiwan, and several members of its senior management team are seconded from the parent company. Its principal raw material - hot-rolled steel coils - is primarily sourced from the parent group ensuring supply chain stability.
While the steel industry is inherently cyclical, CSC Steel has demonstrated resilience across market cycles, having remained profitable in nearly every year over the past two decades. The sole exception was in 2014, when the company incurred a loss due to a combination of global oversupply, aggressive low-cost imports, and a sharp decline in steel prices.
The most recent industry bottom occurred in 2020, following the peak in 2022. At present, the market appears to be in the downward leg of the cycle. Despite this, CSC Steel managed to remain profitable throughout the 2019–2024 period, although 2021 was an outlier year in which the company did not generate positive operating cash flow.
Over this five-year span, the company achieved a Return on Equity (ROE) ranging from 1.7% to 9.9%, with an average of approximately 5% -ma modest but consistent performance.
What stands out about CSC Steel is its valuation. The current share price of RM 1.18 trades significantly below its Graham Net-Net value of RM 2.00, a conservative estimate often used as a proxy for liquidation value. Given its clean balance sheet, consistent profitability, and strong backing from CSC Taiwan, CSC Steel does not exhibit any signs of financial distress.
This combination of subdued business performance and low investment risk places CSC Steel on the borderline between the “Goldmine” and “Turnaround” quadrants of the Fundamental Mapper - an apt reflection of its value-oriented appeal.
ASTEEL’s Reinvention: Can a Downstream Focus Reverse Years of Losses?
ASTEEL Group (formerly known as YKGI Holdings Berhad) is today primarily engaged in the manufacturing and trading of steel-related products.
Prior to 2019, the company operated in both the upstream and downstream steel segments. Its upstream operations—which included the production of cold rolled coils and galvanized coils - were capital-intensive and faced intense competition from low-cost imports, particularly from China. As a result, the group suffered significant losses due to industry overcapacity, volatile steel prices, and thin margins.
In 2018–2019, the company exited the upstream business with the disposal of its Bukit Raja plant. This strategic move aimed to stem losses, reduce debt, and reposition the group toward higher-margin downstream manufacturing and trading activities.
In 2023, the company was rebranded as ASTEEL Group, with a renewed focus on downstream steel products - particularly roofing systems and structural components.
Although the company has not yet returned to consistent profitability - recording losses from 2022 to 2024 - there are signs of recovery. Over the past six years, revenue has grown by 4.3% CAGR, and gross profit margins have shown improvement, indicating early progress in its turnaround efforts.
As such you should not be surprise to see that if falls into the Turnaround quadrant in the Fundamental Mapper.
Recasting the Business: How Mayu Global Left Steel Behind
Mayu Global, formerly a steel-centric industrial group prior to 2020, has transformed into a diversified entity with property development now a central pillar of its business.
In 2019, the steel segment generated approximately RM150 million in revenue. However, this has declined by about two-thirds to an average of RM50 million annually over the past three years. This shift away from steel is understandable, as the segment has been consistently unprofitable over the past six years.
While the move into property development was initiated by the previous board in 2018, the change in controlling shareholders around 2022/23 appears to have solidified the group’s strategic pivot. Under the new leadership, there has been a marked increase in execution focus and capital commitment toward property projects.
In 2023, property development accounted for about ¾ of the group’s total revenue. Although this reduced to half in 2024, the property development segment still accounted for a big part of the profits in 2024.
Given the business mix today, peer comparisons would be more meaningful against property developers rather than steel manufacturers.
Hot rolled steel prices have risen by about 20% since the start of the year. Will this boost the performance of the steel flat companies? If you want to understand more about the impact of the steel price on other Bursa flat steel companies, join me this at this Thursday podcast
Mycron operates in both the midstream and downstream segments of the steel value chain, supplying Cold Rolled Coil (CRC) products, steel tubes, and related steel items to domestic and international markets.
Over the past six years, CRC has consistently contributed the largest share of revenue but has shown greater earnings volatility. In contrast, the steel tube segment has provided more stable profitability, particularly during downturns in the CRC business.
The Group was profitable in only three of the past six years, with earnings closely tied to favourable pricing and volume dynamics:
• In 2021 and 2022, profits peaked alongside the global steel price cycle, driven by elevated selling prices and strong gross margins.
• In 2024, despite gross margins being about half of those in 2021–2022, profit rebounded due to a 50% surge in sales - largely from export-driven growth in CRC. Mycron capitalised on trade disruptions, particularly benefiting from CPTPP market access as competitors like China and Vietnam faced tariff barriers.
If Mycron sustains its export momentum, especially in CRC, its performance in the next steel price cycle could surpass that of the last, enhancing its turnaround prospects.
If you want to understand more about the impact of the steel price on other Bursa flat steel companies, join me this at this Thursday podcast
Hiap Teck: When Half the Profit Lies Off the Balance Sheet
Hiap Teck derives the bulk of its revenue from two main segments: trading and manufacturing.
• The trading segment focuses on the import, export, general distribution, and leasing of steel products, hardware, and building materials.
• The manufacturing segment covers the production, sale, and rental of pipes, hollow sections, scaffolding equipment, and other steel-related products.
Although Hiap Teck holds a 27.3% stake in a steel plant in Terengganu that produces slabs and billets, this investment is accounted for using the equity method - its share of profit or loss appears as a single line item in the income statement.
Ironically, from FY2019 to FY2024, nearly half of Hiap Teck’s cumulative profit after tax came from this associate. As such, evaluating Hiap Teck’s business outlook and intrinsic value likely calls for a sum-of-the-parts valuation approach rather than relying solely on consolidated figures.
Along this line, looking at operating profit and returns based only on NOPAT from the consolidated segments provides only half the picture. To gain a true sense of value and performance, the contribution from the associate should be considered separately.
Sapura Energy Berhad is a Malaysia-based global energy services provider, operating in over 10 countries with core businesses in EPCIC (engineering and construction), operations and maintenance, and tender-assist drilling.
Financial strain began in late 2019, driven by unprofitable legacy fixed-price contracts, a heavy debt burden from earlier expansion, and tightening working capital. The COVID-19 pandemic worsened the situation, causing delays, cost overruns, and liquidity stress.
While the company generated operating profits in most of the past 6 years, net losses were driven by significant write-offs, impairments, and high interest expenses. The positive PAT in 2025 was primarily due to gains from the disposal of investments.
By 2022, Sapura Energy was classified as a PN17 issuer, prompting a comprehensive Reset Plan focused on debt restructuring, exiting loss-making segments - particularly exploration and production - and refocusing on core operations. It also launched Kitar Solutions, a joint venture offering offshore decommissioning services, aligning with its sustainability goals and energy transition strategy.
However, the turnaround and restructuring plan did not anticipate renewed oil price declines stemming from tariff-related tensions. Lower prices now add pressure on revenue and cash flows, with recovery hinging on timing, execution discipline, and continued stakeholder support.
For most retail investors, Sapura Energy remains a high-risk proposition - best approached by those with expertise in financial restructuring and the oil and gas sector.
If not Sapura Energy, what about others? If you want to find out about investing in the Petronas group of companies, join me at today’s podcast
Reach’s core business is the exploration, development, and sale of crude oil and petroleum products. Since 2019, the company has been in turnaround mode, and while losses have narrowed significantly, it still remained in the red in 2024.
A major shift came in 2023 when Super Racer Limited, a Hong Kong-based investor, became the controlling shareholder through a debt-to-equity swap. The board was restructured, and strategic control shifted from Malaysian operators to Hong Kong financial professionals.
Reach began repositioning itself - from a technically driven E&P operator to a financially driven energy investment platform. The focus shifted from field expansion to balance sheet repair and asset optimization.
Now, just as the turnaround seemed to be gaining traction, the company faces a new challenge: declining crude oil prices triggered by tariff pressures. This may force Reach to accelerate its repositioning - prioritizing:
• Cost containment and operational downsizing
• Asset monetization or divestment
• Strategic partnerships
• Diversification beyond upstream oil and gas
In short, Reach Energy is no longer a straightforward oil producer. For fundamental investors, unless there is high conviction in a clear catalyst or turnaround outcome, it remains a speculative and special situation play.
If not Reach, what about others? If you want to find out about investing in the Petronas group of companies, join me at this week’s podcast
In 2024, Hibiscus can be described as a regionally focused, independent upstream oil and gas company. It has operatorship control over a diversified portfolio of producing and development assets across Malaysia, Vietnam, and the United Kingdom.
This marks a significant evolution from just six years ago, when Hibiscus had only two core assets. Since then, its total assets have nearly tripled, from RM2.4 billion in 2019 to RM6.6 billion in 2023, reflecting the company’s strategic acquisition-led growth.
To fund this expansion, Hibiscus has tapped both debt and equity markets. Between 2019 and 2024:
• Total debt increased from RM5 million to RM749 million
• Total equity expanded from RM1.2 billion to RM3.1 billion
While ROA improved from 11.6% in 2019 to 13.1% in 2024, the enlarged capital base has diluted returns to shareholders. ROE declined to 16.1% in 2024, down from 20.6% in 2019, despite a spike to 35.5% in 2022 following the Repsol acquisition and elevated oil prices.
With crude oil prices declining in the wake of ongoing trade tensions and tariff-related uncertainties, there are concerns about Hibiscus’s ability to sustain its current profit levels.
Lower demand and weaker pricing could pressure margins, particularly given the company’s increased cost base. The declining share price since the start of the year may be a reflection of these market concerns.
However, one mitigating factor is the historically moderate correlation between oil prices and Hibiscus’s ROE. Over the past 12 years, the correlation between year-end Brent crude prices and the company’s ROE has only been about 40%.
This suggests that while oil prices do influence profitability, ROE is shaped by a more complex mix of factors — including production volume, capital discipline, cost control, and timing of investments. As such, the potential profit impact of lower oil prices may not be as severe as feared.
