Improved margins. SCOMNET chalked in net margins at 18.8% in 1QFY23 vs. 16.3% recorded in 4QFY22. The said improvement came due to better sales of higher profit margin products that mitigated the higher operational expenses from the rising minimum wages and higher electricity tariff (that is expected to result in c.RM800,000 of additional expenses in each quarter). We reckon that margins to stay hit c.20% level in coming quarters, owing to the stronger orders in higher margins products. Meanwhile, SCOMNET continues to operate in a healthy balance sheet with cash position of RM171.1m together with zero borrowings as well as positive net operating cash flow.
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