Journey to Wealth
SAM Engineering - A slower growth outlook ahead
Period 1Q13
Actual vs. Expectations The 1Q13 earnings of RM9.0m accounted for 32.4% and 39.0% of the street and our full year estimates of RM27.8m and RM23.1m respectively. While the group's bottom line came in above expectations, its top line of RM118.8m was within the street and our expectations, which accounted for 19.2% and 21.5% of the street and our full year numbers of RM617.5m and RM552.1m respectively.
Dividend No dividend was announced during the quarter.
Key Result Highlights
YoY, the group's revenue increased 15.5% to RM118.8m vs. RM102.9m in 4Q12, thanks to the stronger demand in HDD test equipment, which increased its Equipment Manufacturing segment revenue by RM14.1m to RM99.6m in 1Q13. The bottom line recorded a net profit (NP) of RM9.0m vs. RM3.7m a year ago due to the higher revenue, lower cost and a forex gain of RM1.6m.
QoQ, the revenue was lower by 28.7% due to lower sales from the Equipment Manufacturing segment (-31.8%) and Precision Engineering segment (-7.6%) as opposed to 4Q12 when the quarter saw strong recovery in the HDD industry from the Thai flood. The NP, however, increased by 12.2% to RM9.0m vs. RM8.0m in 4Q12 due to the stronger USD, a more favourable sales mix in the Equipment Manufacturing and Precision Engineering segments and lower costs for start-up projects.
Outlook Although the 2H is normally the stronger quarters, the global financial and economic uncertainties may affect the earnings and growth visibility of the semiconductor and HDD industries. This will indirectly and directly affect the growth of the group.
However, the aerospace industry is expected to provide stability to the group's earnings.
Change to Forecasts Revised down our FY13-14E NPs by 8.7%-11.6% to RM21.1m-RM26.7m due to the normalisation of HDD test equipment demand after the Thai flood, the slowdown in equipment spending growth in the semiconductor industry, which is expected to be cushioned by the aerospace industry.
Rating Downgraded to MARKET PERFORM
This is because the stock now offering only a 10% in potential total return and coupled with weaker earnings outlook.
Valuation Downgraded our TP to RM2.80, based on a SOP valuation methodology. We expect the group to register RM26.7m in FY14, of which RM11.6m coming from its core business and RM15.1m from the full year earnings impact of the aerospace engine casing business.
We value its core business with an industry's average PER of 7.0x and peg a market PER of 15.0x for its aerospace engine casing business division.
Risks Fluctuation in foreign currencies and cyclical in nature.
Others
Note that the group has a total ICULS outstanding of RM135m and assuming a 20% conversion for each of the next 5 years, the number of shares factored in our calculation of the diluted earnings per share numbers are 6.4m and 12.9m for FY13 and FY14 respectively.
Source: Kenanga
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
146.41%More articles on Journey to Wealth
Ekovest: No plan to launch another offer for Iskandar Waterfront City
Created by kiasutrader | Mar 29, 2018
Kenanga Research - On our Portfolio - Parliament dissolution around the corner?
Created by kiasutrader | Mar 25, 2013
Plantation Sector - Proposed accounting standard scrapped OVERWEIGHT
Created by kiasutrader | Mar 25, 2013
Pavilion Reit - Limited upside, earnings upside have been priced in HOLD
Created by kiasutrader | Mar 25, 2013
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
Introducing MY's First IPO Fund for Sophisticated Investors!
New Update. Discover investment communities that resonate with your ideas
M & A Value Partners IPO Equity Fund has been launched - Targeted 13% Return p.a
Latest Videos
Apps
Top Articles
2
3
4
save malaysia!
Visa-free travel to China extended for Malaysians to 30 days
5
6
Koon Yew Yin's Blog
CPO price is rising rapidly as shown by chart below - Koon Yew Yin
7
Axcapital's investment blog
KAB - Executing its way to a record quarter. Could more Petronas contracts be coming?
8
BFM Podcast
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
