Strong earnings growth. SKPRES's 1HFY13 results came in within expectations, making up 51.9% of our and 51.6% of consensus' full-year forecasts. Revenue increased 44.2% y-o-y while earnings grew 64.9% y-o-y, bolstered by stronger demand for its plastic moulding products and value added services. On a sequential basis, however, revenue dipped 1.3% q-o-q although earnings climbed 1.4% q-o-q, mainly due to the different product mix achieved during the quarter.

Balance sheet stays solid. The group's balance sheet remained solid, with a net cash position of 9.8 sen per share as the company replenished its coffers with RM26.2m in cash and cash equivalents during the quarter.

Declares 1.3 sen dividend. Backed by 9.8 sen cash per share for the reporting quarter vs 8 sen per share in 1Q13, management declared an interim dividend of 1.3 sen per share. This represents 52% of our full-year dividend forecast of 2.5 sen per share. The entitlement date for the dividend is 22 Nov with payment on 21 Dec. At current levels, the stock still offers an alluring dividend yield of 6.8% for FY13 and 8.4% for FY14.

Maintain BUY. Overall, we remain positive on SKPRES' prospects moving forward underpinned by: i) its client, Dyson's expansion to China, ii) consistent orders from the company's other clients, and iii) the stock's attractive dividend yield. We thereby reiterate our BUY recommendation on the stock, pegged to a 9.0x CY13 EPS, in line with the industry average. Our fair value (FV) does not include the potential dilution effects of its recently-issued warrants, which are trading at a 48.0% premium based on the exercise price and warrant price. While we think that warrant holders are unlikely to convert for the time being, our FV should be diluted to RM0.42, assuming full conversion.

Source: OSK