We initiate coverage on Supercomnet Technologies Berhad (Scomnet), a leading manufacturer of cables and medical devices in Malaysia, with a Buy recommendation and TP of RM2.00/share.
Proven Track Record. Scomnet is a sole supplier of medical devices that it manufactures for its key customers. The group has reputable global clients, which provide Scomnet good order visibility and protect its bottom-line via cost passthrough solution.
Robust Earnings Growth. We estimate Scomnet to register a profit growth of 51.5%40.6%/22.7% in FY22/FY23/FY24 driven by existing orders from Edward Lifesciences and Ambu. In addition, strong demand from Mermaid’s declotting device, new orders secured from Stellantis and maiden contribution from IHS are expected to boost earnings significantly over the next 3 years.
Preparing for the Future. To facilitate future growth, the group will proceed with a 5-storey building expansion. The 5-storey building will provide an additional 12,000 sqm and will take about 3 years to complete. The new plant will be GMP compliance and will cater for more medical products.
Transfer of Listing. The group has kicked off the necessary preparations for transfer of listing. We opined that the move will help to lift interest on the stock, especially from institutional funds (below 15% currently).
Reasonable Valuations. Scomnet is currently trading at 26.2x PER. We opine that our target PE of 32.0x is reasonable (in-line with its 5-years mean), considering that the peers are trading at 31-36x.
Source: TA Research - 29 Sept 2022
Created by sectoranalyst | Sep 20, 2023
Created by sectoranalyst | Sep 19, 2023