CEO Morning Brief

Supercomnet Shares Log Worst Day in 15 Months After Below-view 1Q

Publish date: Wed, 22 May 2024, 11:34 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (May 21): Shares of Supercomnet Technologies Bhd (KL:SCOMNET) fell on Tuesday and ended as their worst day in 15 months after the medical device manufacturer reported a weaker-than-expected first quarter.

SCOMNET fell as much as 5.5% or nine sen to RM1.55. At the closing bell, the stock was down 4.3%, its steepest decline in a single day since Feb 8, 2023. The company is valued at RM1.31 billion at its last price of RM1.57 after some 5.76 million shares changed hands.

Its net profit of RM8.1 million for the three months ended March 31, 2024 only accounted for 21% of the consensus full-year estimates. The sole two research houses covering the stock are betting that earnings will pick up but are divided on their recommendations following the recent rally.

“We deem the results to be within expectations as we expect higher sequential profit moving forward,” said TA Securities who kept the stock on a “buy” call. The research house, which has a target price of RM1.85, is “sanguine” that profits will improve quarter-on-quarter as key customers increase orders.

Shares of SCOMNET, which also makes electrical wires and cables for the automotive and industrial sectors, have risen 28% so far this year and ahead of peers UMediC Group Bhd, whose shares have climbed 5.7% year-to-date, and Adventa Bhd, which has logged a 2% gain.

The medical segment nevertheless accounted for 76% of sales in the first quarter. This year, the company is expected to rake in net profit of RM39.15 million, according to Bloomberg, compared to RM29.73 million in the previous year.

Inter-Pacific Research, the only other research house covering the stock, kept its earnings forecast for the year in anticipation of “full recovery” in automotive segment sales by December.

The house maintained SCOMNET’s “neutral” rating with a target price of RM1.51, flagging its current share price, which has largely reflected its near-term prospects and offering limited upside potential.

On its part, SCOMNET said it remains optimistic of its mid- to long-term prospects and “will continue [to] work closely with existing and new customers on product development.”

Source: TheEdge - 22 May 2024

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