Review

• Supercomnet Technologies Berhad’s (Scomnet) 9M22 net profit of RM26.9mn was within our and consensus expectations, accounting for 70.5/72.7% of full-year forecasts respectively.

• In 3Q22, Scomnet posted a record high net profit of RM10.1mn (+7.5% QoQ) on the back of higher sales, which increased 13.2% QoQ to RM45.1mn. We attribute the better performance to higher sales from all three business segments

• In terms of contribution, the medical segment remained the key earnings contributor to the group, accounting for 56% of sales while automotive and industrial segment accounted for 14% and 30% of revenue respectively.

• YoY, 9M22 net profit grew by 55.6% to RM26.9mn, ahead of higher revenue growth of 18.1% to RM121.0mn. The better performance was driven by new products and higher orders from key customers. Coupled with increased sales of high-margin products, PBT margin improved 7.6pp to 29.2%.

• A first interim single tier dividend of 0.5sen per share was declared. Note that this is the first time Scomnet announced dividend in 3Q.

Impact

• No change to our FY22-FY24 earnings estimates pending an analyst briefing this Thursday.

Outlook

• We expect Scomnet to post a stronger 4Q22 performance on the back of higher sales to key customers such as Mermaid, IHS and Stellantis.

• On expansion, we gather that the second phase of the “2nd floor expansion plan” (990 sqm), is on track to be completed by end of 2022 and will cater for its medical segment, which will drive Scomnet’s future growth.

Valuation

• We reiterate Buy on Scomnet with an unchanged target price of RM2.00/share based on a target PE of 32.0x CY23 diluted EPS.

Source: TA Research - 23 Nov 2022