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[TA Securities] SKP Resources - New Factory Bearing Fruits TP- RM 1.95 (47% upside)

1year 100%
Publish date: Mon, 22 Feb 2016, 11:37 AM
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Review

 
 SKP Resources recorded a 9MFY16 net profit of RM60.5mn (+31.1% QoQ,
+96.9% YoY). The results were within our expectations but below
consensus at 70.9% and 66.9% respectively.
 Sequentially, the better performance was mainly underpinned by the full
quarter contribution of its first cordless vacuum cleaner project. Awarded in
the first half of last year, the project has a value of RM400mn/year and
commenced production in late September 2015. We are expecting a flat Q4,
attributed to a slight delay in production of its second cordless vacuum
cleaner project (refer to report dated 15 January 2016), coupled with a
seasonally weaker quarter due to CNY celebrations.
 YTD, the group reported a stellar performance with revenue and net profit
rising by 94.0% YoY and 96.9% YoY respectively. The driving force behind
this is the consolidation of results with Tecnic’s subsidiaries and production
of new Dyson products.
 

Outlook

 We remain upbeat about the group’s prospects moving into FY17. In the
coming year, earnings will mainly be driven by full contributions from its
cordless vacuum cleaner projects secured in the previous year. Amid slight
delays, production of the second cordless vacuum cleaner is expected to
ramp up to peak production by April 2016 – in time for the next financial
year. We are expecting a high earnings growth of 79.3% YoY in FY17.
 Additionally, we do not discount the possibility of further contract awards.
Currently, only 25% of capacity in its new plant has been utilised – leaving
room for contract wins from either Dyson or non-Dyson related parties.
Dyson has previously made known its aggressive roadmap to launch no
fewer than 100 products by 2018. However, as the group currently focuses
on the production of cordless vacuum cleaners, we believe awards will only
materialise in the 2H2016.

Valuation

 Value SKP at an unchanged TP of RM1.95/share – based on a PE of 18x and
CY16 EPS of 10.9sen. Maintain BUY on the company, premised on its: 1)
Exciting earnings growth with three year CAGR of 68.2% YoY; 2) Potentially
positive newsflow in the event of contract wins; 3) Decent FY17-18
dividend yields of 4.6-6.1% and 4) Predictable earnings given cost pass

through arrangement with customers.

 

SKPRES (7155)
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Discussions
1 person likes this. Showing 3 of 3 comments

Parker Yeap

My TP is Rm2.30 or higher, will based on next quarter result! =)

2016-02-22 21:31

eddyng3300

should be good

2016-02-22 21:34

kevinspot

Biochips Market is expected to grow at the CAGR of 17.23% during 2015-2022
http://www.briskinsights.com/report/global-biochips-market-forecast-2015-2022

2016-02-25 00:09

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