Review

• SKP’s FY24 net profit of RM96.8mn came within ours and consensus fullyear estimates at 104.9% and 105.0%, respectively.

• Although no dividend was declared during the quarter (YTD: nil), we expect SKP to declare a final dividend later, as done in previous years. Based on our dividend payout assumption of 50%, we estimate a final dividend of 3.0sen, which implies a dividend yield of 2.7% at current levels. SKP has adopted a dividend payout policy of a minimum of 50% of its net profit.

• YoY, FY24 net profit fell 31.1% to RM96.8mn as revenue was 25.9% lower at RM1,863.4mn. The softer earnings performance was largely attributed to lower sales orders as a result of weak sentiment in both domestic and international markets.

• QoQ, 4QFY24’s net profit increased 5.3% to RM24.7mn as revenue was 1.3% higher at RM458.8mn. The stronger earnings performance was driven by various cost optimisation initiatives.

Outlook

• Despite the prevailing market uncertainty, we remain cautiously optimistic about the group’s medium-to-longer term prospects, supported by its customers’ new model launches and product portfolio expansion, along with opportunities from the China Plus One strategy.

Impact

• Maintain our FY25 and FY26 earnings forecasts. Meanwhile, we introduce the FY27 earnings forecast of RM186.0mn, representing an earnings growth of 14.2%.

Valuation & Recommendation

• We take this opportunity to roll forward our valuation base year to CY25. Consequently, we tweaked the target price higher from RM0.78 to RM1.15 based on 12.0x CY25 EPS. Maintain a Hold call on SKP.

• Key downside risks include lower-than-expected utilisation and inability to secure new contract manufacturing jobs.

Source: TA Research - 4 Jun 2024