KUALA LUMPUR (April 26): CGS-CIMB Research has maintained its “add” rating on SKP Resources Bhd at RM1.43 with an unchanged target price of RM2.35 and said it continues to like SKP for its robust order flows, coupled with its effective management of its supply chain disruptions and social risks.

In a note on Monday (April 25), the research house said SKP’s operations do not face material disruptions from component shortages.

It said as SKP primarily serves one key customer, it has the flexibility to shift its production lines accordingly — should component shortages affect any particular production line, it could ramp-up the production of other products in other lines.

Meanwhile, it said SKP is experiencing a circa 10% shortage in labour; this is less severe than what other industry players face (circa 20%).

“Hence, we remain positive on SKP’s prospects.

“Moreover, we believe Malaysia is bound to allow the recruitment of foreign workers soon, enabling SKP to effectively utilise its new facitilies (60% additional capacity) due for completion in 4QCY22F,” it said.

CGS-CIMB said that this, coupled with margin expansion from higher insourcing of printed circuit board assembly (PCBA), underpins our strong 19.3% FY21-24F core EPS CAGR forecasts for SKP.

“The current share price provides an attractive entry point as the stock trades at 11.2x/9.9x CY23/24F P/E, more than 2SD below its five-year mean,” it said.