• Overview. Kumpulan Perangsang Selangor (KPS) 4Q22’s net profit surged by more than two folds to RM46.7mn from RM17.3mn in 4Q21 backed primarily by better product mix and higher share of profit from associates; Sistem Penyuraian Trafik KL Barat Holdings (SPRINT) following the disposal of SPRINT.

• Key Highlight: KPS’s manufacturing business reported a 7% decline in revenue to RM269.2mn in 4Q22 versus RM289.6mn in 4Q21. This was due to 1) lower contribution from Century Bond Berhad (CBB) (- 9% YoY) owing to softer demand for offset carbon cartoon boxes amid global chip shortage, and 2) cessation of one major customer for King Koil Manufacturing West LLC (KKMW) which led to a 36% decline in revenue contribution.

• Against Estimates: Above. KPS’s 12M22 revenue was in line with our estimate though its net profit of RM70.1mn exceeded our estimate following gain from the disposal of SPRINT

• Earnings Revision. No change to earnings estimates pending further insight from the upcoming discussion with management on February, 28th .

• Outlook. We are cautious on 2023 outlook following global inflationary pressure which may affect consumer spending for electronics products. Still, we foresee the reopening of China’s economy would eventually boost the global demand for manufacturing products and provide catalyst to our earnings forecasts.

• Our Call. Maintain a BUY call on the stock at a TP of RM0.83, pegged at a PER of 10x to 2023 EPS of 8.3 sen.

Source: BIMB Securities Research - 28 Feb 2023