KUALA LUMPUR (Dec 1): TA Securities has downgraded SKP Resources Bhd to "hold" at 75 sen, with a lower target price of 78 sen (from RM1.10), based on 12 times earnings per share for calendar year 2024, to reflect cautiousness against SKP’s challenging operating environment, and the narrowed risk-reward potential of the counter.
In a note on Friday, TA Securities said it expects orders for the contract manufacturer of consumer and household electronics to remain soft in the near term, amid prevailing macroeconomic headwinds, and their dampening effect on demand for consumer and household electronics.
“We have cut our financial year ending March 31, 2024 (FY2024)/FY2025/FY2026 earnings estimates by 9.4%/25.8%/7.3%, as we conservatively toned down our sales [assumptions] by 10.3%/21.7%/9.5%," the research house said.
However, TA Securities remained positive on SKP’s medium- to long-term prospects, supported by a customer’s new model launches, product portfolio expansion, and opportunities under the China Plus One strategy.
The research house also noted that SKP’s new plant in Senai, Johor, which is expected to enlarge its capacity by 50%, will facilitate its future growth.
“The group has successfully obtained the certificate of completion and compliance for the new factory. Plans for the new space include expanding its printed circuit board assembly, plastic injection moulding, and engineering capabilities,” TA Securities reported.
Commenting on financial earnings for the second quarter ended Sept 30, 2023, TA Securities said SKP’s net profit declined 41.8% year-on-year (y-o-y) to RM48.7 million, mainly due to lower orders from a key customer, higher operating expenses, and higher depreciation cost. Revenue contracted 26.3% y-o-y to RM951.5 million.
The results were within TA Securities' full-year estimate and the consensus forecast.
TA Securities projects SKP to register a net profit of RM89.4 million for FY2024, down 38.1% from FY2023.
At the time of writing on Friday, shares in SKP Resources traded up 2.5 sen or 3.33% at 77 sen each, valuing the group at RM1.2 billion.