Hong Leong Investment Bank Bhd (HLIB) maintained its HOLD call on SAM Engineering & Equipment Bhd with a higher target price of RM4.40 from RM3.55, as analysts said earnings missed expectations due to weaker Aerospace performance and transition-related costs despite a recovery in the Equipment segment.
The research house noted that the group’s FY26 core net profit fell 52% year-on-year to RM45 million, accounting for 84% of its forecast and 88% of consensus estimates. In 4QFY26 alone, core net profit dropped 53% quarter-on-quarter and 77% year-on-year to RM5.8 million, driven by lower revenue and deeper losses in the Aerospace division.
According to the analyst, the Aerospace segment was weighed down by Thailand relocation and start-up expenses, alongside lower casing and structure shipments. These pressures offset gains in the Equipment division, which benefited from stronger semiconductor demand and a broader recovery in the wafer fab equipment cycle.
Revenue declined 3% quarter-on-quarter to RM348 million, as Aerospace weakness outweighed Equipment growth. Year-on-year, revenue slipped 6% while earnings were further impacted by sub-optimal plant utilisation of around 50% compared to 80% previously and RM14 million in impairment charges linked to the Senai facility.
The research house also highlighted that FY26 results included lower interim dividends of 1.4 sen per share, reflecting a reduced payout ratio of around 20%.
Looking ahead, Hong Leong Investment Bank said Aerospace recovery remains intact over the medium term, supported by higher aircraft deliveries expected in 2026. However, margin expansion is likely to depend on the completion of the Singapore to Thailand relocation and successful ramp-up of new facilities.
The analyst added that Equipment demand remains aligned with the global semiconductor upcycle but noted that export restrictions on China continue to weigh on near-term demand. While new customer wins and HDD recovery plans could support FY27 growth, these remain early-stage developments that will take time to contribute meaningfully.
As of 11.31 am, the stock price drops 4.08% to RM4.70.
