Mercury Securities has placed a BUY call on SKP Resources Bhd with a TP of RM2.00 based on the company’s published FY24 results the house likes the stock for its attractive expansion plans and dividend payments.
SKP Resources is one of Malaysia’s largest and quickest-growing integrated contract manufacturers, catering to the E&E, Industrials, Automotive, Food, and Beverage Industries. Besides being ranked 46th in the latest Manufacturing Market Insider (MMI)’s Top 50 EMS Providers in 2021, the company was able to achieve stellar results with a 4-year CAGR of 8.8% from FY19 to FY22 despite the COVID-19 pandemic.
It achieved a record high profit in FY22 due to robust sales and growth diversification across various industry segments namely EMS and non- EMS sectors. Our estimates assume 2H23 to be stronger on the back of higher sales propelled by festive seasons and new product launchings, which is on track to achieve another record year.
In 2022, the company invested approximately RM94.39m including the ongoing construction of a new multi-storey factory building (Plant 5, site 5) on a 6.4-acre plot of land in Johor Bahru, expected to be fully constructed within March 2023. The completion of plant 5, will provide an additional floor space of 650,000 sq. ft. which is 50% more than its existing floor space.
The new plant will house new assembly lines and new printed circuit board assembly facilities to cater to the growth over the next 3 years. The company also completed the acquisition of another new land in Johor Bahru (site 6) in April 2022, which is not far from site 5. The newly acquired site 6 spans 7.9 acres which will be utilised to cater for future growth and expansion.
Led by Dato’ Gan Kim Huat who has over 30 years of experience in the plastics injection moulding industry, the management team has an average industry experience of more than 10 years, supported by a long-serving technical team to spearhead the business going forward.
The company has a minimum dividend pay-out policy of 50%. A final single-tier dividend of 5.55 sen per ordinary share was declared in FY22 which constitutes approximately 50% of the Group’s profit after tax (PAT).
