• KPS has been on an acquisition spree into numerous manufacturing companies over the past few years, which now comprise 83% of total revenue, posting a 3-year revenue CAGR of 44% in 2020
• Part of the supply chain of a leading British household appliances brand (<10% of total revenue), a key common customer within the EMS space
• KPS is trading at historical 10.6x PER vs. comparable peers at 13.4x

Diversified Out of Water and Utility Business Into Manufacturing

Kumpulan Perangsang Selangor (KPS) has in the past been involved in the water and utility business. Post divestment of SPLASH in September 2018, its core business is now focused on manufacturing, which made up 83% of overall FY20 revenue. The key manufacturing business is largely in EMS injection molding and box builds (through its wholly-owned Toyoplas and CPI Penang), packaging (whollyowned Century Bond), and bed mattress manufacturing and the licensing rights of King-Koil (via 60% stake in Kaiserkorp). 12% of its revenue was derived from the trading of chemical products for water treatment plants via its 51%-own Aqua-Flo.

Mainly Provides Consumer Appliances, Auto, Healthcare Products

The range of products which KPS manufactures include WIFI router/extenders, security cameras, cordless vacuum cleaners, printers, power tools, etc via Toyoplas. It also manufactures more sophisticated products like car radios and speedometers, walkie-talkies, medical data loggers and heart rate monitors via CPI Penang Sdn Bhd.

Revenue Grew at a 3-year CAGR of 44%

FY20 revenue grew 24% yoy to RM1.1bn mainly driven by an 83% growth in manufacturing segment as Toyoplas saw a full-year contribution. Revenue for the trading business also grew by 12% yoy. 2020 EBITDA margin sustained at 10.5% (-0.1ppts) despite revenue growth as Toyoplas incurred higher raw-material and logistic costs. Core net profit grew from RM19m in 2019 to RM55m in 2020 (+192% yoy) driven by stronger associate profit (from RM15m to RM37m) led by government compensation to KPS on the low SPRINT highway traffic volume during MCO period.

KPS Is Trading at a Historical 10.6x PER

Based on the current price, KPS is trading at historical 10.6x CY20 PER, as compared to its larger EMS peers (VS, SKP, ATA) at an average 25.1x and a discount vs. its comparable peers (Formosa Prosonic, MTAG, KHIND) at 13.4x. The group has recently approved and will adopt a minimum 30% dividend payout policy. In FY19, KPS paid a 32.6sen special dividend following SPLASH divestment.

Source: Affin Hwang Research - 7 Apr 2021