Review

• Supercomnet Technologies Berhad’s (Scomnet) FY23 net profit of RM29.7mn was within our expectations but below consensus at 96.9/93.2% of full-year forecasts, respectively.

• FY23 net profit declined 9.6% to RM29.7mn as revenue decreased 12.8% to RM138.1mn. We attribute the weaker performance to: i) lower demand from industrial and automotive segments, ii) electricity tariff hike, iii) oneoff expenses of RM0.9mn related to the transfer of listing to the main market of Bursa Malaysia and iv) fair value expenses related to ESOS.

• 4Q23 PBT improved 6.4% QoQ to RM10.0mn, in tandem with revenue growth of 7.1% to RM34.8mn. The better sales were boosted by higher demand from the medical segment, with the recovery of demand for Endoscopy Video Cables from Ambu.

• In terms of contribution, the medical segment continued to be the key earnings contributor to the group, accounting for 79% of sales while automotive and industrial segment accounted for 2% and 19% of 4Q23 revenue respectively.

Impact

• No change to our earnings forecasts.

Outlook

• Despite the hiccups in 2023, we are optimistic that 2024 will be a growth year, driven by the automotive and medical segments. We expect Edward and Ambu’s contribution to increase by 13% and 18%, respectively in 2024. In addition, maiden contribution from IHS and Customer N will bode well for the group.

Valuation

• Maintain our Buy recommendation on the stock with an unchanged TP of RM1.46/share based on 32.0x CY24 EPS.

Source: TA Research - 29 Feb 2024