• Overview. SKP reported a record breaking quarterly net profit of RM44.1m (+77% yoy) for 2QFY21 mainly due to substantial orders from existing key customers. On qoq basis, net profit spiked by 339% owing to higher revenue, different product mix, and better cost management. Overall, profit margin improved to 6.1% (+3.6 ppts qoq, 1 ppts yoy).

• Key highlights. Printed circuit board (PCB) segment contributed positively during the quarter and the company also utilized capacity productively by working on new products. SKP expects to expand Printed Circuit Board Assembly (PCBA), injection moulding and engineering capabilities to cope with additional orders from existing and new customers.

• Against estimates: Inline. The 1HFY21 net profit of RM54.1m (+25% yoy) made up 45% of consensus full year forecast.

• Outlook. We believe demand for EMS products will grow on better prospect from the change in brand-owner to hire-contract manufacturer and only focusing on product design, development, and marketer; widely adapted by Western brands. SKP’s multiple capacity expansions are expected to materialize from a widened product portfolio and expectation of securing more orders from key customers in the near-term. SKP continued to command solid fundamentals with a better net cash position of RM39.8m or 3 sen net cash/ share as at 1HFY21

Source: BIMB Securities Research - 20 Nov 2020