Posted by johnny cash > 2014-05-12 20:59 | Report Abuse

 To beef up capacity by 75% in stages, starting from 2HFY15. SKP recently
announced an acquisition of a 2ha land in Senai, Johor for RM6.8m to build a new
factory. This expansion will add additional 75% of capacity but full operation will only
come on-stream in FY18. Assuming the new capacity is coming in evenly over
FY15-18, this would mean that SKP will add over 20% of new capacity p.a. over the
next three years. We understand that the new production could be started as soon
as 3QFY15. We estimate that the capex could be in the range of RM40m-50m. We
view that this significant expansion plan would not stretch the company’s balance
sheet as it has a strong net cash position of RM98m as at 3QFY14.
 Where will the demand come from? In addition to the minimum wage policy,
SKP’s gradually declining earnings trend over the last three quarters was partly due
to the weak orders from its key customers. However, given that one of its key clients
will be launching a new product, we believe that this could revive orders moving
forward as an introduction of new product will typically spur consumers’ demand.
Furthermore, we are hopeful that SKP would see more demand from its other
existing clients as well, rising alongside a recovery in global economic activities, and
this could boost demand for consumer electronics products such as televisions.
 Going big into Dyson’s other product segment. SKP’s remarkable growth in
FY10-13 was mainly attributed to its maiden turnkey contract for Dyson’s vacuum
cleaner product segment. We understand that SKP has secured a similar type of
contract for Dyson’s other product segment and majority of SKP’s new plant’s
capacity, which will start operating in 3QFY15, will cater specially to this product.
While we acknowledge that SKP has a tight timeline in setting up its new facilities,
we believe that SKP could be able to deliver on schedule, given its experience in
setting up new production facilities. Assuming a total capex of RM40m-50m, we
estimate that the payback period would be four-five years’ time.
 Estimated earnings CAGR of 26% in FY14-17F. We are estimating SKP to
achieve RM29m, RM40m, RM52m and RM59m in FY14F-17F respectively. In
summary, the earnings leap in FY15F (+36% yoy) will be underpinned by: a)
stronger order volume for existing capacity, due to client’s introduction of a new
product and rising demands for existing products and b) 4-6 months contribution
from its new plant’s operations. Meanwhile, earnings growth in FY16-17F (+32% and
+13% yoy respectively) will be mainly due to the new plant’s production facilities
coming on-stream.
 Strong balance sheet. SKP has zero debt and is sitting on a cash pile of RM98m
(11.5sen/share), equivalent to 31% of its market capitalisation. Assuming SKP pays
out 50% of its net profit as dividend and forks out RM50m for expansion purposes in
FY15-16F, we estimate that SKP’s cash level would reach RM92m by FY16F.
 Decent dividend yield of 6-8% in FY15-16F. Backed by its strong cash flow, SKP
has consistently paid out 46-50% of its earnings over the last three years. Assuming
a 50% payout ratio, we estimate that SKP will offer a lucrative dividend yield of 5.9%
and 7.8% for FY15 and FY16, respectively. In addition, despite the massive capacity
expansion in the pipeline, we do not discount the possibility that SKP would dish out
a special dividend to reward shareholders as this small-cap company owns RM48m-
58m cash (5.3-6.4sen/share) in its coffer, post an estimated RM40m-50m capex.

Posted by johnny cash > 2014-05-12 21:02 | Report Abuse

VALUATION
 Initiate coverage with BUY and a target price of RM0.55, deriving from 10x
FY15F PE. Our target price implies an upside of 46.7% from its current share price.
FIGURE 6: VALUATION METHODOLOGY
Division (RMm) PE (x) Value (RMm)
2015F earnings 49.1 10 491
Share base 900.0
TP per share (RM) 0.55
Source: UOB Kay Hian
 10x 2015PE is reasonable. Our target 2015PE of 10x implies a 19% discount to
SKP’s listed peers’ weighted average PE of 12.4x in 2015, based on consensus
estimates. Bursa-listed V.S Industry is SKP’s most comparable peer as it is also one
of Dyson’s contract manufacturers although in different product category. However,
we opine that SKP has competitive edge over its peers as the company’s strong
financial strength (net cash position vs VS Industry’s 0.4x net gearing) enables it to
expand its production capacity easily to cater clients’ orders.
 Local manufacturing companies are trading at similar valuation. On a broader
basis, we include local manufacturing companies with market cap below RM500m
and earnings base of RM30m-60m for comparison purposes. These companies are
trading at weighted average 2014PE of 9.9x and 2015F PE of 9.6x, justifying our
10x PE valuation as being reasonable. From EV/EBITDA valuation perspective,
SKP’s 3.9x FY15F is much lower than that for the others’ average of 7.0x.
 Our target price suggests 5.2x cash-adjusted 2015PE. Excluding our estimated
FY15F net cash (9sen/share) from the market price implies that SKP is currently
trading at undemanding 5.2x 2015F PE.
 Our target price excludes the potential dilution arising from SKP’s warrants as
it is currently out of money and is trading at a high premium of 41.3%. As such, we
see no reason for warrant holders to convert their warrants anytime soon. However,
if we assume that the warrants are fully converted, our target price would be
RM0.53, after including the cash proceeds from warrants.

Posted by johnny cash > 2014-05-12 21:03 | Report Abuse

FINANCIAL HIGHLIGHTS
 Weak FY14 but strong recovery from FY15 onwards. For 9MFY14, SKP recorded
revenue of RM302m (-26% yoy) and net profit of RM22m (-35% yoy). The weak
result was mainly due to reduced sales order and higher cost as a result of the
minimum wage policy. We expect 4QFY14 to see RM8m in net profit (+38% qoq,
+6% yoy). The significant qoq improvement is mainly due to the higher sales order,
particularly from Dyson. SKP’s utilization rate has recovered from a low of 60% in
3QFY14 to about 75-80%. On a full year basis, we estimate that SKP will only
achieve RM29m net profit (-26% yoy) in FY14. On the other hand, we expect a
strong recovery for SKP in FY15-17. We estimate SKP to achieve net profit of
RM40m, RM52m and Rm59m in FY15-17, representing CAGR of 22%.
 Expecting yoy margin improvement due to favourable product-mix. For
9MFY14, SKP recorded EBIT margin of 9.2%, a yoy 3.8% contraction. The lower
margin was mainly due to the impact of minimum wage policy as well as the higher
proportion of sales for low-margin products (sub-assembly products). In FY15,
margin is expected to improve due to better product mix. The sales order growth will
come mainly from Dyson’s products, which require fully-integrated manufacturing
solutions that granted better margin. We estimate SKP’s EBIT margin to range
between 10-11% in FY15-17F. However, we believe SKP is unlikely to enjoy high
EBIT margin of more than 12%, which was registered in the period of FY11-13, due
to inflation of labour and electricity costs.
 Intact working capital management. SKP’s cash conversion cycle has been well
managed between 38-47 days in FY11-13. We view that this range is sustainable
as: a) SKP has managed to consistently control its inventory/COGS ratio in the
range of 7-9% over the past five years, and b) It is unlikely to see a significant spike
in receivable turnover days, given its clients’ strong profile. In addition, SKP’s net
cash flows have been in a positive position since 2008 and we foresee this trend to
continue going forward, with the exception of FY15F due to non-recurring major
expansion capex.
FIGURE 9: NET PROFIT AND GROWTH
TRENDS
Source: SKP, UOB Kay Hian
FIGURE 10: EBIT MARGIN TREND

Posted by johnny cash > 2014-05-12 21:05 |

Post removed.Why?

Posted by johnny cash > 2014-05-12 21:06 | Report Abuse

SKP Resources (SKP MK)
Technical Buy
Last price: RM0.375
Resistance: RM0.395, RM0.425
Support: RM0.335
BUY with a target price of RM0.425. SKP’s share price has
retraced, consolidated and recovered gradually, forming a bullish
reversal pattern of “cup and handle” over the last 6 months. Last
Friday’s breakout to close above the neckline of RM0.365 was
backed by a much higher trading volume of 14.1m shares (vs 20-
day average of 2.9m) that validated the breakout. The bullish
crossover in both MACD and Stochastic, which signals a strong
momentum ahead, should in our view push the share price higher.
Moving forward, we peg our near-term upside target at RM0.425
using X to X projection based on the “cup and handle” pattern.

Posted by johnny cash > 2014-05-12 21:09 |

Post removed.Why?

Posted by jbond > 2014-05-13 01:22 | Report Abuse

good reasoning! too bad tat no mkt on tuesday. ready to whack with my 6-digit selling from lbalum & gadang. any concern on its dependence on dyson? dyson products r quite pricey while china economy is slowing down?

Posted by Angangang > 2014-05-14 11:49 | Report Abuse

......

Posted by lex1999 > 2014-05-14 11:55 | Report Abuse

report so long....and today drop :(

Posted by goldenrain > 2014-05-14 13:17 | Report Abuse

I have collected more at 37. Don't worry.. Just wait and see on Monday.

Posted by Yuming > 2014-05-14 17:06 | Report Abuse

aim go in at 0.36, hope it drop tomorrow

Posted by goldenrain > 2014-05-14 18:01 | Report Abuse

I also hope it could go lower tomorrow. Just sold off my presbhd and have big bullets to shoot this counter. But please take note that this counter will fly next Monday onwards.

Posted by maxkiller > 2014-05-15 07:07 | Report Abuse

what make you believe that it will fly from next Mon onwards??Thankss

Posted by johnny cash > 2014-05-15 07:23 | Report Abuse

SKP Resources (SKPRES) – Not Rated------------KENANGA

On previous trading day, SKPRES climbed 1.0 sen (+2.67%) to settle at RM0.38
with high trading volume. From a technical perspective, SKPRES has been trading
in a sideway trend channel for the past 2.5 years. Key indicators (MACD,
Stochastic and RSI) are currently hooking upwards, suggesting strong buying
interest is building up. Based on this bullish bias, we believe that SKPRES could
retest its resistance level of RM0.40 in the near-term. Meanwhile, we suggest
traders to look for a resistance breakout moving forward. Shall the RM0.40
resistance be taken out, we believe SKPRES could stage a rally towards the
‘Flagpole’ measurement objective of RM0.52.
Outlook Bullish
Key Resistance level RM0.45 (R1) RM0.49 (R2) RM0.52 (R3)
Key Support level RM0.34 (S1) RM0.30 (S2) RM0.27 (S3)
Strategy Not Rated Current Price RM0.38

Posted by johnny cash > 2014-05-15 07:24 | Report Abuse

About the stock:
Name : SKP Resources Bhd
Bursa Code : SKPRES
CAT Code : 7155
Market Cap : 346.5
52 Week High/Low : 0.40/0.30
3-m Avg. Daily Vol. : 1,807,319.0
Free Float (%) : 49.1%
Beta vs. KLCI : 0.7

On previous trading day, SKPRES climbed 1.0 sen (+2.67%) to
settle at RM0.38 with high trading volume. From a technical
perspective, SKPRES has been trading in a sideway trend
channel for the past 2.5 years. Key indicators (MACD,
Stochastic and RSI) are currently hooking upwards, suggesting
strong buying interest is building up. Based on this bullish bias,
we believe that SKPRES could retest its resistance level of
RM0.40 in the near-term. Meanwhile, we suggest traders to look
for a resistance breakout moving forward. Shall the RM0.40
resistance be taken out, we believe SKPRES could stage a rally
towards the ‘Flagpole’ measurement objective of RM0.52.

Posted by johnny cash > 2014-05-15 07:24 | Report Abuse

Key Support & Resistance level
Resistance : RM0.45 (R1) RM0.49 (R2) RM0.52 (R3)
Support : RM0.34 (S1) RM0.30 (S2) RM0.27 (S3)
Outlook : Bullish

What does indicator says:
MACD : Bullish
Stochastic : Oversold
RSI : Bullish
Trend : Bullish

What should you do:
Strategy : Not Rated
Current Share Price : RM0.38

Fundamental Call
KNK : N.A.
Consensus : RM0.34

Posted by bluechip > 2014-05-15 19:13 | Report Abuse

Temporary only lio

Posted by goldenrain > 2014-05-16 09:41 | Report Abuse

Ahhh.. Moved too fast.. No chance to collect more.. Was expecting it to touch 0.4 next week..
Next week this counter gonna run wild.. Sit tight and watch it fly..

Posted by smallboy > 2014-05-16 09:56 | Report Abuse

The skpres-wa can convert to mother share?

Posted by AhJee > 2014-05-16 10:54 | Report Abuse

finally , the counter start moving...

Posted by wolf1 > 2014-05-16 14:48 | Report Abuse

offload all at 40sen....thanks SKPRES. Wait for u at 0.34/35...

Posted by goldenrain > 2014-05-16 15:20 | Report Abuse

Wolf u offloaded too early.. Should wait for next week.. U will see some surprise soon.

Posted by AhJee > 2014-05-16 18:02 | Report Abuse

Golden rain, I have hold for 2 years, what level you advise to let go?

Posted by Ameera > 2014-05-16 20:16 | Report Abuse

Bot the WA... Hope it's will ride when the mother up too...:) :)

Posted by goldenrain > 2014-05-16 22:13 | Report Abuse

AhJee, despite sitting on solid returns, I will hold the stock as it offers 6-7% dividend yield. Personally I believe the stock still has legs to go purely based on valuation grounds.

Posted by Chris Sy > 2014-05-17 10:24 | Report Abuse

:D

Posted by 林俊松 > 2014-05-18 09:30 | Report Abuse

Why skpres rise while lcth don't?
LCTH having higher NTA value, revenue, eps & lower PE value.
LCTH also have clean debt.
Hmm...

Posted by Chris Sy > 2014-05-18 15:05 | Report Abuse

aiyoyo lim arr....u also hv skpress bor?

then i ask u back again lar....why when LCTH rise , skpress coma ? kikikiki

Posted by Chris Sy > 2014-05-18 15:23 | Report Abuse

aiyoyo...just joking dun flag me lah...kikikiki

Posted by 林俊松 > 2014-05-18 15:46 | Report Abuse

Skpress is the 1st share I bought when I enter share market~

Posted by cvbgck > 2014-05-19 15:10 | Report Abuse

today forum so quite

Posted by AhJee > 2014-05-19 18:05 | Report Abuse

wah same like me , I hold both LCTH and SKPResources

Posted by Angangang > 2014-05-20 20:20 | Report Abuse

Report come out

Posted by didi7349 > 2014-05-20 21:36 | Report Abuse

Director is optimistic of future prospect......strong order fr existing customer.....flying tml

Posted by Angangang > 2014-05-21 08:30 | Report Abuse

Today up or drop....

Posted by Angangang > 2014-05-21 09:41 | Report Abuse

drop....

Posted by lex1999 > 2014-05-21 10:42 | Report Abuse

dropping.....

Posted by wolf1 > 2014-05-21 16:02 | Report Abuse

good...drop

Posted by rimrim > 2014-05-21 20:58 | Report Abuse

Q-report come out??

Posted by lex1999 > 2014-05-22 11:09 | Report Abuse

huge sell transaction....anything happen?

Posted by bmwm5 > 2014-05-22 11:42 | Report Abuse

dropping soon to 0.35

Posted by nightfly > 2014-05-22 14:08 | Report Abuse

Better Run ....

Posted by nightfly > 2014-05-22 14:09 | Report Abuse

Before masuk Lorry

Posted by nightfly > 2014-05-22 14:09 | Report Abuse

Then Bye bye ...

Posted by Relax > 2014-05-22 14:15 | Report Abuse

Don't worry...company make profit & cash rich...By at resistance...price stable.

Posted by kahfiehlai > 2014-05-22 21:43 | Report Abuse

gambling counter now

Posted by ckinvest > 2014-05-22 22:03 | Report Abuse

TP 0.60 coming soon....

Posted by Nickgan > 2014-05-22 22:08 | Report Abuse

gona fly tmrw! hold tight and get rich :D

Posted by logic > 2014-05-22 22:44 | Report Abuse

MY source told me SKPress will reach RM 1

Posted by chiongster1234 > 2014-05-22 23:00 | Report Abuse

My source told me will limit up.