1H13 results review.
SKP Resources recorded 1H13 revenue of RM243.9m and net profit of RM23.8m,
making up 50.5% and 54.1% of our full-year projections respectively. YoY, the
1H13 revenue rose 44.2% while net profit grew by 64.9%, attributable to the
strong surge in demand for its plastic injection moulding segment as well as
value-added services such as assemblies of plastic products and components for
the electrical and electronics industry.
Its payday!
Recall that in our earlier report dated 25 September 2012, we had called a
TRADING BUY on SKP Resources as we noted the stock's undemanding valuation at 7.3x
FY13 PER (34.5 sen) and high dividend yield of 7.1%. The share price closed at
38.5 sen yesterday, having climbed 14.4% to as high as 39.5 sen since that
report. The group has declared an interim dividend of 1.3 sen, which will go
ex- entitlement today.
Time to take profit.
During the same period, the FBM KLCI has risen only a mere 0.7% amid jittery
investor sentiment on a global scale. Much uncertainty has also stemmed from China's
subpar economic data in recent months, a market where SKP Resources is expected
to have increased dependence via its largest client - Dyson (Note that Dyson accounts
for around 55% of SKP Resources' revenue). Hence, we reckon it is appropriate
for risk averse investors to lock in on the gains at 39 sen for a handsome 17%
return (including dividends) since our report call two months ago.
SWOT ANALYSIS
Strengths: A
almost 100% raw material and currency pass-though protects SKP from earnings
fluctuations. Full turnkey project management capabilities and specialty skill
sets also allows SKP to have a superior client retention.
Weaknesses: Heavy
dependence on a single client.
Opportunities:
Ability to leverage on Dyson’s maiden foray into China. Current capacity
utilisation of 75% allows SKP room to grow.
Threats: Rampant
counterfeit of Dyson products in China and a slowing global economy.
TECHNICALS
Resistance:
RM0.40 (R1), RM0.41 (R2)
Support: RM0.36
(S1), RM0.33 (S2)
Comments: SKP’s
share price is on a mild uptrend.
Overall, the technical indicators point towards a
sustainable uptrend, although a near term downcycle may be on the cards. Expect
some dowside in the short term, look to buy back towards the lower 36 sen
support level.
BUSINESS OVERVIEW
SKP Resources Bhd primarily manufactures plastic parts and
components, makes precision molds, sub-assembles electronic and electrical
equipment and other secondary processes. It has three main subsidiaries i.e.
SKP, GHI and SPI. SKP has been manufacturing plastic injection moulded parts
and components for the electronic and electrical products industry since 1994.
Goodhart Industries (GHI), its other manufacturing arm,
targets on enhancing the range of plastic injection moulded parts produced by
the group and focuses on precision engineering plastics injection moulding and “big
tonnage” injection moulding. The group is now Malaysia’s leading local One-Stop
Solution Centre, which also caters to a global base of clients. Its portfolio
of clients include Dyson, Toshiba, Sony, Pioneer and more.
GEOGRAPHICAL
SEGMENTS
Services provided:
New product development/ program management, full service engineering
consultation, mould design and fabrication, close tolerance plastic injection,
advance secondary process operation, component assembly, contract
manufacturing/box built Production Breakdown
Injection molding
operation: Precision injection molding, gas assist molding, high speed thin
wall molding, auto insert molding, in mould label molding, e mold, heating and
cooling, double injection
Perfect Finish:
Spray painting, automated multi colour tempo printing facilities, tempo
printing for profile surfaces, hot stamping, untrasonic welding, heat staking,
silk screen printing.
Source: Kenanga
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