Company Background. SKB Shutters Corporation (SKB) specialises in the design and production of roller shutters, racking systems, steel doors, storage & handling systems. Manufacturing takes place in Malaysia, while sales & distribution extend across major regions including Malaysia, Asia, Australia, Africa and the Middle East. The group serves a diverse clientele, including main contractors, manufacturing facilities and warehouse operators.

Prospects. (i) Boosting profitability and expanding customer base through R&D in niche products such as high-performance roller shutters, high-security fire doors and S5 shelving systems. This growth is supported by an economic recovery in construction sector and advancements in logistics, digital infrastructure and industrial buildings, (ii) Launched a new breakthrough powerless flood shutter (PFS) to address global flash floods, receiving strong interest and acceptance in warehouse facilities, hospitals and commercial property basement carparks, and (iii) In FY23, the group acquired 9.8 acres in Eco Business Park V to build a new manufacturing plant as part of its expansion. This facility will boost production capacity and meet growing global demand for its products.

Financial Performance. In 3QFY24, SKB reported higher revenue of RM30.7mil (+18% YoY) with a PAT of RM3.8mil (+25.5% YoY). This was mainly due to higher sales and better profit margins on niche-specific products, including fire & non-fire high-performance roller shutters, high-security metal fire doors and S5 shelving racking systems, as well as effective cost management.

Valuation. SKB is currently trading at an attractive 9.7x trailing P/E, which is lower than Bursa Industrial Production Index’s 18x. As a comparison, Eonmetall Group, which is involved in manufacturing steel storage & racking systems, metalwork and industrial process machinery & equipment, trades at a much higher trailing P/E of 15.6x.

Technical Analysis. We expect further upside for SKB after posting a long positive candle and hit a new multi-year high a few sessions ago. The stock also broke out from a 3-week bullish pennant pattern, which coincided with rising EMAs and likely indicate that the upward momentum may persist. A bullish bias may emerge above the RM1.03 level with stop-loss set at RM0.89, below the 20-day EMA. Towards the upside, near-term resistance level is seen at RM1.30, followed by RM1.40.

Source: AmInvest Research - 29 Jul 2024