• Overview. Dancomech Holdings Berhad (Dancomech) 3Q22’s core  earningssurged by 30.8% YoY and 22.6% QoQ to RM56.5mn powered by  higher contribution across all business segments (Table 2).

• Key highlights. Dancomech revenue in 3Q22 rose by 27.9% YoY primarily  driven by higher contribution from Metal Stamping division with sales  jumping by two-fold to RM34.6mn due to pent-up demand, offsetting  the zero contribution from MHS Solutions division. Similarly, the  improvement in revenue from Trading and E&E Engineering were driven  by better market condition with the lifting in movement restrictions and  re-opening of international borders.

• Against estimates: Above. The 9M22 performance was above our  estimate with core profit of RM11.7mn (+7.4% YoY) made up 81% of our  full year forecast. This was mainly due to better-than-expected  performance from Metal Stamping and E&E Engineering division.  Notwithstanding that, we make no change to our earnings projection for  now pending further guidance from the management.

• Outlook. We see better earnings prospects for Dancomech given a  favourable outlook for Metal Stamping and E&E Engineering division  following the reopening of international orders and the relaxation in COVID-19 policy worldwide which may provide potential upside catalysts  to our FY22/23F forecast.

• Our call. Maintain a HOLD call on Dancomech with unchanged TP of  RM0.37, pegged at 10x PER to FY23 EPS of 3.7 sen.

Source: BIMB Securities Research - 24 Nov 2022