We remain positive on PECCA’s mid to long term outlook from sustainable domestic sales (driven by Perodua) and improving export markets (especially from China). Auto-related M&A exercise and European Aviation Safety Agency (EASA) licensing (to penetrate into the lucrative aircraft seat segment) will drive earnings growth post FY21. Valuation is undemanding at 11.4x FY20E (ex -cash P/E stood at 6.2x), 39% lower than peers’ 18.8x P/E and 15x historical P/E since listed, supported attractive DY of 5.6-6.0% for FY20-21, strong operational FY20- 21 cash flow of RM23-24m p.a. and net cash position of RM98.2m (53.5sen/share or 45.7% to share price). Technically, PECCA is poised for an oversold rebound towards RM1.30-1.40 levels after a brief sideways consolidation.

Widening Valuations and Attractive Yields

We remain positive on PECCA’s mid to long term outlook from sustainable domestic sales (driven by Perodua) and improving export markets (especially from China). Auto-related M&A exercise and European Aviation Safety Agency (EASA) licensing (to penetrate into the lucrative aircraft seat segment) will drive earnings growth post FY21. Valuation is undemanding at 11.4x FY20E (ex -cash P/E stood at 6.2x), 39% lower than peers’ 18.8x P/E and 15x historical P/E since listed, supported attractive DY of 5.6-6.0% for FY20-21, strong operational FY20- 21 cash flow of RM23-24m p.a. and net cash position of RM98.2m (53.5sen/share or 45.7% to share price). Technically, PECCA is poised for an oversold rebound towards RM1.30-1.40 levels after a brief sideways consolidation.

Source: Hong Leong Investment Bank Research - 11 Dec 2019