KUALA LUMPUR (Sept 2): Shares of SAM Engineering and Equipment (M) Bhd (KL:SAM) suffered the biggest single-day decline in more than two years amid fallout from safety troubles at Boeing and Airbus.

SAM Engineering fell as much as 87 sen or 16% to RM4.48, its lowest since April 22, 2024. The stock ended the day at RM4.60, down 14% and marking its worst day since share split in March 2022. At that price, the company has a market capitalisation of RM3.1 billion. Trading volume totalled nearly seven million shares, more than 10 times above the 200-day moving average.

Net profit for the first quarter ended June 30, 2024 (1QFY2025) accounted for just 8% of consensus full-year forecasts, prompting two of the three analysts covering the stock to cut their estimates and target prices.

“We expect SAM’s earnings blip to continue into” 2QFY2025 due to “hiccups in its aerospace segment and the sharp fluctuation” in exchange rate, said Maybank Investment Bank (Maybank IB).

SAM Engineering’s aerospace segment appears to have suffered temporary setback from a delay in new product launch that temporarily halted delivery, as well as quality defects from materials procured by suppliers, the house said.

“Our industry checks indicate the issue at its aerospace segment to be a blip, and operations should be back to normal” within the next one- to two quarters, Maybank IB said and kept its “buy” call on the stock, but cut its target price to RM6.15.

Shares of SAM Engineering have surged this year and peaked on June 13, thanks to stronger-than-expected FY2024 earnings but have since lost more than one-third of their value. Year-to-date, the stock is still up about 15%.

SAM Engineering acquired Aviatron Sdn Bhd, which mainly produces engine nacelle beams for Boeing and Airbus aircraft. Boeing has been plagued by multiple safety issues, as US authorities investigate the quality problem of its B737 Max and B787 models, while Airbus is plagued by supply chain issues.

Hong Leong Investment Bank (HLIB) slashed SAM Engineering’s target price to RM4.98 from RM6.19, but maintained its “hold” call on the stock, noting that its valuations are now at “parity” to its domestic-listed peers, after accounting for the recovery of its aerospace segment over the past two quarters.

The house still likes Sam Engineering for its exposure in both the “ultra-fast-growing aerospace and semiconductor industries, which we deem both to be long-term complementary”, as well as for being “a highly rare secular growth stock”.

“While the group’s Thailand expansion will take time before breaking-even, we are encouraged by the narrowing losses in each subsequent quarter,” HLIB added.

On Friday (Aug 30), SAM Engineering reported that its 1QFY2025 net profit more than halved to RM10.10 million, from RM20.53 million in 1QFY2024, as sales at its equipment segment fell, while income was lower at its aerospace segment, partly due the higher startup cost in Thailand.

The company also said it is “engaging closely” with Boeing and Airbus to manage any changes to their delivery plans.