News

In a Bursa announcement yesterday, PIE has proposed a 5-for-1 share split which will eventually increase its share base from 76.808m shares of RM1.00 par value, to 384.042m shares of RM0.20 par value each.

Comments

We were positively surprised by the announcement as this exercise will: (i) make PIE shares more affordable to investors, and (ii) improve the marketability and trading liquidity of the stock.

The Proposals are conditional upon approvals being obtained from Bursa Malaysia, shareholders of PIE at an EGM to be convened and other relevant authorities.

Barring any unforeseen circumstances and subject to all required approvals being obtained, the Board expects the Proposals to be completed by the 3Q2016.

Outlook

The group has recently secured a new European customer which is a global player in the industrial electronic industry. Although earnings contribution from this customer is immaterial at this juncture, we gather that more orders are likely going forward, which could turn out to be a major customer for PIE, given PIE’s competitive pricing as well as its top-class manufacturing capabilities.

With the group’s recent major transformation (with the additional production line of fully automated plastic injection moulding, CNC centre as well as new metal stamping division), we expect more orders, which support our conservative 2-year NP CAGR of 12%.

Forecast

We made no changes to our FY16E-FY17E earnings. We will adjust our per share data once the exercise is completed.

Rating

Maintain OUTPERFORM

Valuation

Maintain our TP of RM14.55 (ex-split: RM2.91) based on a targeted 15.0x FY17E PER.

Risks to Our Call

Lower-than-expected orders from customers.

Adverse currency fluctuations

Source: Kenanga Research - 13 Apr 2016