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Technology Upgrade Cycle: Wafer Test + SLT + Automotive Burn-In
KESM is no longer a pure burn-in house.
"In the new year, KESMI will be introducing wafer and system testing and burn-in as part of its suite of services. These capabilities reflect a natural progression to support the demand for advanced, high-performance chips in AI for data centres and the EV applications. We will take time to develop before reaching full scale." The Chairman's statement in 2025 annual report
KESM’s balance sheet is now an asset in itself, and arguably the company’s strongest competitive advantage.
Net cash (after borrowings): RM175 million.
This places KESM among the most liquid outsourced test houses in Malaysia on a per-revenue basis.
Total current assets – total liabilities: RM190 million.
Demonstrates solvency and shock resistance even in prolonged industry downturns.
NTA per share: RM7.80.
This compares favourably to KESM’s typical share price range of RM4–5, indicating the market is pricing the stock at a discount of nearly 40%.
PPE: RM141 million.
Represents heavy capitalisation in burn-in and test assets—primarily automotive-grade systems—which are already certified and ready to be absorbed by Tier-1 customers as demand recovers.
Strategic implication:
KESM can withstand long inventory cycles, fund expansion without dilution or debt, and deploy capital when competitors are constrained. The large cash buffer makes it a long-dated option on the EV/SiC semiconductor boom.
ramp up of Infineon kulim 3 phase 1 production would need more outsourcing of burn-in testing. Better automotive semiconductors demand is also slowly truning the corner as evidence from the latest Q results/announcement of the top 5 IDMs.
"Current trade and other receivables increased by 7% or RM3.1 million, from RM43.7 million to RM46.7 million, mainly due to compensation receivable for unfulfilled minimum orders, as well as higher sales towards the end of the quarter. " This was stated in the Analysis of Financial Performance of the 1Q/26 results
The higher sales towards the end of the quarter around rm1.9 million (rm3.1m -rm1.2m). If the momentum is sustained, the next quarter would see increased revenue..
This is the kind of quarter that precedes the real breakout quarter.
Consecutive 2 quarters making profits, though small.
Employees benefits (labour costs) and other expenses (electricity and plant repairs and maintenance) substantially reduced. Breakeven revenue per quarter reduced to rm50+ millions
Capex for the last Q alone was Rm20.1 millions, with Capex committed Rm6.7 millions. Company is investing in wafer and SLT testing and burn-in. Company already ISO 27001 certified.
Compensation from customer of Rm1.2 million due to unfulfilled minimum order. Customers are tied to minimum order quantity commitment. Customers are firm and relationships are good .
The QR stated increasing demand from AI/data centres, coupled with the significant Capex, indicated the confidence and expectation of a promising ramp up in furure demand. Though automatics still lacklustre, it will eventually pick up. Both Infineon and Nxp forecasted improving revenue in automotive sector in the mid single digit percentage for the current Q.
Sitting on rm200 millions cash and debts of only rm36 millions, NTA rm7.8, isn't it a gem?
This counter has no strategic future. China EVs are conquering the globe and they have vertically integrated their whole supply chain. They have the scale to do their own testing, why KESM EV tesing is needed? Pivoting to EV chip testing is a strategic mistake.