Result

• FoundPac Group (FoundPac) posted a revenue of RM12.4m for its 3QFY21 results which rose 6.9% QoQ and 11.5% yoy. Meanwhile, PATAMI increased by 61.9% QoQ and 4.9% YoY to RM3.2m thanks to the increase in revenue contributed by both precision engineering and laser stencil segments.
   
• Dividend declared. The Group has declared a single-tier interim dividend of RM0.01 per shared. This was the second dividend declared in FY21 since 2Q21 with the divided of RM0.005 per share.
   
• Earnings below expectation. 9MFY21’s PATAMI and revenue were recorded at RM8.3m (+29.9% YoY) and RM36.5m (5.5% YoY) respectively which are below our in-house estimate after accounting for 64% of our full year net earnings forecast and 60.5% of revenue forecast. The lower-than-expected profit and revenue were mainly due to unsatisfactory performance recorded in 2Q21.

• Contributed by overall export sales. The increase in revenue and PATAMI during this quarter was mainly contributed by better export sales, which accounted for 80.75% or RM10.0 million of the total revenue for the current quarter with increase of 8% YoY and 18% QoQ mainly thanks to the increase in sales under European customers, by RM1.5 million.

• Contraction of YoY PBT margin. The Group recorded PBT of RM 11 million for 9M21 compared to RM 16.5 million in 9M20 with a decline of 12.7ppts PBT margin. This was mainly due to lower revenue contribution by precision engineering and laser stencils segment while the fixed cost element remained.

Comments

• We expect FoundPac’s performance would improve amid the supercycle of the industry…… With the advent of the 5G era, the demand for semiconductors and integrated circuits will be greatly enhanced. Therefore, demand for the products of Foundpac will be substantial and driven by the significant CAPEX projected by the semiconductor’s players.

• ……and the new venture to automotive segment. The Group targets to obtain the IATF 16949 certification in June 2021 which is the significant cert for Foundpac to supply automotive parts. The new segment is expected to contribute positively to the Group’s earnings with the robust growth of the automotive industry.

Earnings Outlook/Revision

• We slash our net earnings forecasts for FY21F to RM 11.5M (from RM12.9m) due to lower-than-expected 9M performance but retain our FY22F net profit of RM17.2m (from RM23.2m) with the expectation of better performance on the back of recovery of economy pursuant to the global vaccination programme and the expectancy of new automotive segment.

Valuation/Recommendation

• Maintain BUY with an unchanged target price RM1.08. Our target price is derived by ascribing a 34x PER to the Group’s FY2022F EPS on the back of significant CAPEX projection of the semiconductor players and the expectancy of new automotive segment.

Source: JF Apex Securities Research - 12 May 2021