Highway Holdings Benefits From Myanmar Investment

The labor-force oriented company reported lower costs and a shift of production to Myanmar, sending its stock higher Tuesday morning.

Belinda Zhou
    Feb 18, 2020 8:00 AM  PT
Highway Holdings Benefits From Myanmar Investment
author: Belinda Zhou   

China's original design manufacturer Highway Holdings Ltd. (Nasdaq: HIHO) reported Tuesday it turned profitable in the year-end quarter.

The Hong Kong-based company said that its net sales in the fiscal third quarter increased 22% year-over-year to $3.6 million. Its net income hit $318,000, or 8 cents per share, in contrast to a net loss of $305,000, or 8 cents per share, in the same period of 2018.

Highway Holdings operates manufacturing facilities in Shenzhen, where it designs and manufactures "white label" products, including machine parts and electronics, for other companies.

Roland Kohl, the chief executive officer of Highway Holdings, said lower manufacturing costs allowed the company to maintain its margin targets. 

Kohl also said that the company's factory in Shenzhen and its supply chain has been impacted by the coronavirus outbreak in China.

"Operations at our facilities in Shenzhen are currently halted, and we aren't sure when we will be able to resume full operations. It is difficult to predict the long-term impact, though a short-term impact to our company and customers is to be expected," Kohl said in a statement on Tuesday.

China's authorities have shut down factories nationwide and extended the Lunar New Year holidays to avoid the spread of the coronavirus. 

In response, Highway Holdings has shifted part of its production to Myanmar, which accounted for over half of its monthly sales volume, according to the company's statement.

Shares in Highway Holdings were trading at $2.20 apiece, up 13% Tuesday morning.