Pecca Group Berhad’s (Pecca) earning growth prospects and future growth potential are promising, according to Apex Securities Bhd (Apex).
In its note today (Nov 2), the research house is positive on Pecca’s earning growth prospects, supported by increasing EV adoption, future growth potential from its new capacity expansion as well as greater exposure of aviation segment into the foreign markets.
It said the company involved in automotive upholstery industry’s core earnings is expected to improve, buoy by strong demand from OEM
customers and expansion in margins facilitated by the upskilling of newly recruited workers post-lockdown.
Apex set a target price of RM1.37, by pegging one-year historical P/E of 24.5 times to FY24 EPS of 5.6 sen.
“This is leading to a FV of RM1.37 (14.2% potential upside from current price),” it said.
“We favour Pecca for its double-digit earnings growth potential and backed by a sizeable war chest with net cash position of over RM99.3 million.
“Furthermore, the group is expected to remain in a positive operating cash flow with minimal capex spending of RM6 million for the next 2 years.
“At present, it has a conservative dividend payout policy of minimum 40% of net profit, translating into a potential 1.9% net dividend yield for FY24,” Apex said.
Pecca is involved in styling, manufacturing, distribution and installation of upholstery seat covers as well as the supply of leather cut pieces for automotive upholstery industry. The company was listed as Pecca Group Bhd on 19 April 2016.
