KUALA LUMPUR (Nov 15): Electronics manufacturing services provider ATA IMS Bhd's share price plummeted 19.84% or 51 sen on Monday after the company posted its first quarterly net loss in more than four financial years since the first quarter ended June 30, 2017 (1QFY18).

The stock closed at RM2.06 after it rebounded slightly from an intraday low of RM1.99.

This was the biggest percentage drop in six years, if not longer. It was worse than the global equity rout in March last year in terms of single-day performance.

The quarterly loss of RM11.17 million, which was due mainly to production restrictions as a result of the pandemic lockdown and a manpower shortage, wiped off RM613 million of ATA IMS' market capitalisation.

Trading volume also swelled to 13.04 million shares, the highest level in roughly six months.

Analysts have downgraded their earnings forecasts and target prices in view of the latest quarterly figures.

CGS-CIMB Securities has cut its earnings per share (EPS) forecasts by 14%-72% for FY22-FY24 having a bleak near-term earnings outlook.

The stockbroking firm expects the company to have weak sales and thinner margins due to suboptimal utilisation rates for its facilities in FY22. But it noted the likelihood of a more gradual recovery in production output for FY23 and FY24 as the group gradually replenishes its workforce.

CGS-CIMB downgraded the stock to "hold" from "add" previously, with a substantially lower target price of RM2.48 from RM3.10, anticipating ATA IMS' annual net profit to contract sharply to RM47.2 million for FY22 from RM150.3 million in FY21.

It forecasts RM180.1 million or four sen per share for FY23 and RM208.9 million or 17 sen per share for FY24.

Commenting on its financial performance, CGS-CIMB Securities said ATA IMS recorded a core net profit of RM12.2 million for the first half ended Sept 30, 2021 (1HFY22), which was below its and market consensus' FY22 earnings estimates at 7.5%.

Last Friday, ATA IMS announced a quarterly net loss of RM11.17 million for 2QFY22 compared with a net profit of RM52.29 million a year ago. As a result, its loss per share was at 0.93 sen, versus EPS of 4.35 sen a year earlier. Quarterly revenue shrank nearly 56% year-on-year to RM594.48 million from RM1.34 billion.

ATA IMS attributed the quarterly loss to the fact that it was not able to operate at optimal levels due to a manpower shortage as the government had put a stop to recruitment of foreign workers since the start of the Covid-19 pandemic.

It also added that the Full Movement Control Order, which was implemented on June 1, as well as restrictions of workforce capacity to a maximum of 60% and the aforementioned manpower shortage affected its revenue.

Aminvestment Bank Research also slashed its earnings forecasts by as much as 53% for FY22, 14% for FY23, and 19% for FY24, mainly to reflect the near-term manpower shortage challenges faced by the company.

Hence, the research house expects the company to generate an annual net profit of RM87.1 million for FY22, RM193.2 million for FY23, and RM222.6 million for FY24. Notably, the group posted an annual net profit of RM150.3 million in FY21.

It also deemed ATA IMS' 1HFY22 core net profit of RM10.9 million as weaker than expected, accounting for only 6% and 7% of the research house's and consensus full-year forecasts, respectively.

Consequently, Aminvestment Bank Research cut its fair value for ATA IMS to RM2.89 from RM3.34 previously.

However, the research house has maintained a "buy" call for ATA IMS as it continues to like the company for medium- to longer-term positive prospects.

"We believe the (labour shortage) situation will gradually ease as the economies and borders around the world reopen. Hence, the group's long-term prospects remain positive, supported by sustainable strong demand for its floor and personal care products," the research house said in a client note dated Nov 15.

Aminvestment Bank pointed out that ATA IMS is in the midst of sourcing new factories with plans to expand its current factory floor space by more than 10% in anticipation of more orders over the longer term.

It also highlighted that the company has almost achieved full vaccination for its entire workforce and has been allowed to resume full operations since October 2021.