Overview. Kumpulan Perangsang Selangor (KPS) 3Q22’s core earnings fell by 11% YoY to RM12.9mn despite reporting a moderate growth in revenue of 6% to RM382.8mn. This was primarily due to higher share of losses from associates. Notwithstanding that, EBITDA margin climbed by 0.6-ppts to 12.2% from 11.6% in 3Q21 thanks to better product mix and higher average selling price from King Koil Manufacturing West (KKMW) and Century Bond Bhd (CBB).
Key Highlight: While the Manufacturing business reporting a flattish growth in revenue (+1.3% YoY) (Table 3) amid continuous supply chain disruption and moderate demand for electronics products due to global inflationary pressure and China’s zero-COVID policy, the Trading and Licensing businesses’ revenue jumped by 42% YoY and 14.2% YoY respectively.
Against Estimates: Below. Though KPS’s 9M22 revenue was broadly in line with our estimates at 71%, core earnings of RM23.3mn trailed our forecast at 53%, however. As mentioned, the lower-thanexpected core earnings were dragged by unfavourable contribution by share of associates.
Earnings Revision. We cut 2022-2024 earnings forecast by 15%-26% as we revisit our assumption on the share of profit from associates, with no change to revenue forecast.
Dividend. A total 6.5 sen DPS (single-tier interim DPS of 2.0 sen and 4.5 sen single-tier special DPS of 4.5 sen – following the proceeds from the disposal of 20% shares in SPRINT Holdings) was declared, which implies a 250% of dividend payout.
Outlook. We remain optimistic on KPS’s long-term prospects driven by resilient business performance within the manufacturing business and E&E-related segment across all its subsidiaries.
Our Call. Maintain a BUY call on the stock with a lower TP of RM0.85 (from RM1.04), pegged at a PER of 10x to 2023 EPS of 8.5 sen. We foresee the easing in China’s zero-COVID policy in 2023 to provide an upside catalyst to our earnings forecast.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....