Icon8888 Gossips About Stocks
(Icon) Sam Engineering - An Overlooked Semicon Play
1. A Laggard ?
Many semiconductor stocks had been re-rated recently. In my opinion, Sam Engineering is one laggard that has been overlooked.
2. Historical Profitability
The following is Sam Engineering's recent few quarters' result :
Key observations :-
(a) Sam Engineering derived a significant amount of profit from semiconductor equipment manufacturing. In FY2019, out of segmental profit of RM97 mil, RM41 mil was attributable to semiconductor equipment manufacturing (42% of total profit). Aerospace division accounted for 58%.
(b) Same as many other companies, Sam's semiconductor equipment division did not perform well in March 2019 quarter. If not because of the gain on disposal of properties amounted to RM9.1 mil, segmental profit would be RM6 mil only, almost half of its normal profit of RM12 mil per quarter (please refer to thick line boxes).
(c) However, the worst should be over. In the June 2019 quarter, Sam reported strong core EPS of 14.9 sen. Its semiconductor equipment division's earning normalised to the usual RM10 mil range.
3. Strong Capex
The group has been spending heavily on capex in recent few years. This augurs well for future growth.
4. Concluding Remarks
Over the next few years, the aerospace division will be busy executing its massive RM3 bil contracts.
The semiconductor equipment division will benefit from the coming 5G super boom cycle.
At current price of RM8.00, the stock is trading at 13 times PER (based on 15 sen EPS annualised = 60 sen). Based on my exprience, as its EPS grows in the coming years, PE multiple will also expand as market gets excited about its prospects. I think Target Price of RM12.00 within two years is not impossible.
Buy at own risk.
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Discussions
3 people like this. Showing 17 of 17 comments
Look at this , 80% from Boeing order book belong to 737. what happen if 737 stop production?
737* 4,703
747 822
767 103
777 441
787 624
2019-10-22 14:27
Read this
https://www.sam-malaysia.com/wp-content/uploads/2019/09/SAMEE-25th-AGM-Presentation-Post-Discussion-As-at-21-August-2019-R.._.pdf
It said 737 max less than 10% revenue
2019-10-22 14:40
Boeing 737Max contributed <10% of SAMEE FY2019 Revenue
this was presented in 2019 presentation slides of SAM.
2019-10-22 14:43
Yes, it seem like conflict between their own wording.
How can 4703 Order book contributed less than 10% ?
2019-10-22 15:46
oh, if that is the case, then Sam is a good bet with recovery of semicon + aero CAGR 4% .
I'm in.
2019-10-22 17:19
I totally did not know they did semiconductor business. All this while when i visited their plant in penang I only thought they did fabrication of the hard disk drive pins and metal spring miniature steel fabs.
which part of semiconductors do they produce?
2019-10-23 19:27
If not mistaken, they only make machines for front end and back end semicon manufacturers
2019-10-29 08:18
LOL what do you mean ONLY ?
Front end and back end means cover everything already (they do make HDD components)
2019-10-29 12:31
"only" not necessary a bad thing. merely emphasize they are not making semicon end products. they "only" make the equipments which is a niche market but there are a few big players out there. from annual report 2018 onwards, can see SAM gaining momentum, widening scope with existing customer and winning new big customers.
2019-10-29 15:50
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Sam have 2 legs, one leg is Aerospace and the other equipment (semiconductor & hdd)
Sales of aerospace parts will be further increased next year (2020) due to the followings
There will be an airshow site in December in dubai on november 17th-21st which in 2017, airbus recorded a total of 510 new air plane orders.
The need to start replacing older model airplanes, with the new fuel-efficiency airplanes throughout 2020-2030.
Increase in demand for hdds due to the adoption of 5g technology worldwide will boost its equipment segment's revenue.
With both legs running at high speed, god knows how fast it can go :)
2019-10-22 11:51