Wednesday, 10 January 2018

Sam Engineering (3) - Excellent Results. All Divisions Doing Well

Publish date: 

1. Introduction

SAM released its March 2017 quarterly result this evening. Due to recent strong share price and news of booming semicond industry, I have more or less anticipated results to be good. True enough, the result is indeed very good. Net profit jumped by a massive 90% to RM18.4 mil.

2. P&L Analysis

Key observations :-

(a) Q-o-Q, revenue grew by 18%. Both aerospace and semicond equipment divisions' revenue grew due to stronger demand and better product mix. Revenue of precision engineering division was down slightly.   

(b) When come to segmental profit, all three divisions did well, either matching or surpassing previous quarter performance.

(c) Lower tax rate of 13.9% (vs. 36.2% in previous quarter) also played a role in boosting bottomline.

3. Prospects

Management sounds quite positive about next financial year's prospects (the company's year end is March).

4. Capex

In the three months ended 31 March 2017, the group incurred massive capex of RM67.5 mil (being RM80 mil in March 2017 quarter less RM12.5 mil in December 2016 quarter).

I am very pleased with the abovementioned spending. As we all know, SAM is attractive because of its plan to expand the production capacity of its aerospace division by spending RM100 mil. In the December 2016 quarter, I noticed that the capex so far (9 months) was only RM12.5 mil. Where is the capacity expansion that everybody has been talking about ? Well, in this latest quarter, it finally came through. I heaved a big sigh of relief.

5. Concluding Remarks

In my previous article, I mentioned Target Price of RM7.00 by end 2017. Looked like things are moving faster than anticipated. As at todate, SAM is already trading at RM6.90. With this latest quarter's impressive result and continued positive earning momentum (as per management guidance), I believe the stock can possibly touch RM8.00 by end of this year. 

Fasten your seatbelt and enjoy the ride. The choo choo train is leaving the station.

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