A change of hands at the helm of BSL Corp Bhd and a solid plan to pivot the group’s focus towards higher-value products and services will pave the way for stronger revenue growth ahead.
This, opined TA Securities Research, could garner investor interest over time should the changes and plans in motion prove to be a turning point for the group.
BSL saw the emergence of Datuk Seri Dr Pang Chow Huat and Ho Jien Shiung as controlling shareholders back in June 2021.
They had acquired a collective equity interest of 51.72% in BSL for RM57.5mil.
This was accompanied by a change to BSL’s management team, including the appointment of executive director Hoo Wai Keong who now helms the group.
BSL is currently undergoing a three-year revitalisation plan to pivot the group’s focus towards higher-value products and services.
“Progress thus far has been encouraging with moves to diversify and grow its metal division’s exposure to the higher value and more profitable semiconductor segment,” said TA Securities in a recent report.
Advancements in its plan can be seen through the proposed acquisition of SD Unify Pte Ltd, which operates an International Procurement Office centre and is on the Approved Vendor List of several major semiconductor automated test equipment manufacturers in Singapore.
Additionally, the group won its first contract last November for the manufacture and supply of semiconductor precision machined components and sub-assembly modules worth US$3.5mil (RM14.64mil).
Following the new entrants, BSL saw its share price climbed from around 50 sen (adjusted price after a two-for-one share split exercise on Nov 5) last June to a 52-week high of RM2.43 on Nov 8 before retreating back to the 50 sen-level.
Yesterday, the counter closed down two sen to 50 sen.
TA Securities assigned a fair value of 74 sen to the stock based on a target price-earnings (PE) multiple of 16 times 2023 earnings per share. It does not have any recommendation on the stock.
It said the ascribed PE multiple is justified by BSL’s robust earnings growth profile. For the financial year ending Aug 31, 2022 (FY22) to FY24, TA Securities forecast BSL’s revenue and core earnings to grow at a three-year compound annual growth rate of 10% and 51% to RM212.3mil and RM12.7mil.
This will be underpinned by growth in demand from existing customers alongside economic recovery, prospects of growing exposure to precision machined components catered to the higher value semiconductor segment and savings from manufacturing and cost optimisation initiatives.
In FY21, BSL’s core net profit increased five-fold year-on-year to RM3.7mil as revenue rose 16.3% year-on-year to RM159.5mil on higher sales from both the metal and printed circuit board assembly divisions.
That said, TA Securities highlighted that poor execution of the three-year revitalisation plan, weaker-than-expected sales, and the prolonged Covid-19 pandemic weighing on economic growth and supply chains may be potential risks to the company’s prospects.
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