Penjakoda is a Malaysia-based company spun off from Pentamaster Corporation Berhad (PENT.MK). Benjakoda is mainly engaged in automation technology and solutions in the fields of semiconductors, telecommunications, automobiles, and consumer electronics. The company's products can be divided into two categories: a) automation equipment, such as microelectromechanical systems (MEMS) and intelligent sensor detection processor solutions; b) automated manufacturing solutions (AMS), such as AMS modules and intelligent automated robot manufacturing system solutions. The company went public on January 19, 2018 and issued 192 million new shares at a listing price of HK$1 per share. We believe the company will be another option for investors interested in investment topics such as semiconductor equipment, production automation, and adoption of new optical technology. Net profit increased 151% in the second quarter. The company announced its results for the second quarter of 2018 on Friday. The turnover for the second quarter of 2018 was RM101.3 million, up 99.5% year over year. Net profit for the second quarter of 2018 was RM24.3 million, up 151% year on year and 7% month on month. The gross margin for the second quarter of 2018 was 33.6%, up from 31.9% in the second quarter of 2017 and 30.1% in the first quarter of 2018. As of the end of the second quarter, the company's cash and cash equivalents were RM185 million (partly from the January 2018 IPO), compared to bank loans of RM3.8 million. The company's on-hand orders fell from RM314.5 million on March 31, 2018 to RM235.7 million, but were close to RM239.2 million at the end of 2017. This on-hand order is expected to support the company's growth in 2018 and 2019. According to our understanding, the increase in revenue was offset by an increase in administrative expenses (related to foreign exchange), and the net impact was only about RM1 million, so even after excluding the impact of foreign exchange, the company's operating performance was strong. The turnover of the automation equipment business accounted for 82.8% of total turnover in the second quarter of 2018, up 111.0% year on year to RM83.9 million, mainly due to increased demand for the company's test equipment (mainly for microelectromechanical systems and smart sensor test processor solutions in the telecommunications market (especially in the field of smart mobile devices and automobiles). The automated manufacturing solutions division's turnover increased 57.9% year over year to RM17.4 million in the second quarter of 2018. Revenue growth in this segment was mainly aided by increased market demand for the company's proprietary AMS (Automated Manufacturing Solution) module products and ARMS (Intelligent Automated Robotic Manufacturing Systems) solutions for these industries. The increase in the company's gross margin is mainly due to: a) the delivery of more profitable orders to some customers who have placed orders again; b) the reduction in prototype expenses; and c) the increase in the revenue contribution of the automobile industry, which has a better gross profit margin. In addition to strong orders, the month-on-month increase in inventory levels in the second quarter of 2018 (mainly works under construction) will support the good shipment volume recorded in the second half of 2018. The outlook for the second half of the year remains positive. Although the disappointing performance of other mobile phone components stocks has raised concerns about the prospects of the TMT hardware industry, Benjakoda is expected to record good operating results in the second half of 2018, mainly supported by existing orders. The company expects a positive growth trend in the second half of 2018, mainly driven by 3D sensing test equipment for smartphone devices and automation solutions in the automotive sector. The commercialization of Penjacoda's 3D sensor test equipment for smartphone devices began in 2017. More types of smartphone devices and other devices and applications are gradually adopting 3D sensing, creating huge business opportunities for the company and helping to expand its customer base. 3D sensing technology is being used in other applications such as ATMs, immigration checkpoints, biometric security, and even healthcare, which provides companies with long-term growth potential. The increased use of electronic components in the automotive industry, while the continued growth of electric vehicles has ensured that Pinecota's revenue from automation solutions will remain strong. Industry 4.0 plans and increased adoption have both provided further impetus for the company's automation solutions. We believe that the short-term trade conflict between China and the US brought about a trade transfer effect gave the company better prospects, as a Southeast Asian automation technology and solutions provider accelerated its expansion plans in Greater China. Our opinion: Penjacoda reported strong results for the second quarter of 2018 last week. We believe that due to the potential slowdown in the TMT hardware industry, investors are concerned. However, we believe that as the penetration rate of new technologies and applications such as Industry 4.0, the Internet of Things, electric vehicles, 3D sensing, 5G communication, and artificial intelligence increases, the medium- to long-term growth of Penjakoda will be supported. We still think the company deserves attention, even though its business is relatively small because it focuses on several markets: a) semiconductor equipment, b) production automation, c) optical technology development, d) automotive electronics, and e) new applications. We repeat that the company is expected to benefit from a wider range of new technology applications. Compared to major brands such as ASM Pacific [0522.HK] and K&S, Ben Jacoda is not cheap (note that Penn Jacoda is not in the same field as ASM Pacific and K&S), but we still think investors are willing to give a premium to companies with a unique position. We repeat that semiconductor test equipment manufacturers such as Jince Electronic now have higher valuations. Given its scope of business and customer base, Penjakoda is likely to attract the attention of mainland investors, although its market capitalization is very small at this stage. Catalysts: Announcing results for the third quarter of 2018, new product launches, increased market attention, and acquisition of new Chinese customers.