SKP Resources: 4th Consecutive Quarter of Supernormal Profit Growth (TA)

SKP Resources:
TP: RM0.54
Last traded: RM0.365
4th Consecutive Quarter of Supernormal Profit Growth

_ SKP Resources’ (SKP) 1Q13 net profit of RM11.8mn was in line with our expectations, accounting for 24% of our full-year projections.

_ 1Q13 PBT and net profit grew >100% YoY to RM15.8mn and RM11.8mn respectively underpinned by a decent revenue growth of 107%. The increase in revenue can be attributed to increased sales volume of Dyson Upright Vacuum cleaner of which SKP has been appointed as the contract manufacturer. 1Q13 PBT margin improved marginally by 1%-pt to 12.8% due to higher production efficiency.

_ Comparing with the preceding quarter, 1Q13 net profit was little change from RM11.95mn recorded in 4Q12 while PBT margin stayed relatively flat at 12.3-12.8%.

_ No change to our FY13-15 earnings projections.

_ For this quarter, SKP picked up its 4th consecutive quarter of supernormal profit growth of >50% YoY (see Chart 1). This would imply that earnings contribution from the sale of Dyson’s products is not oneoff. In fact, it has been consistently holding up SKP’s profitability.

Looking forward, earnings are expected to grow higher as we expect SKP to secure additional contracts from Dyson for its different series of home appliances.

_ 1Q13 balance sheet strength remained rock-solid with net cash of 7sen/share. The total current assets of 2.1x the size of total current liabilities suggest that near-term liquidity risk is low. All in, with our earnings growth projections of 31.4% for FY13 largely intact, we continue to expect the company to propose a dividend payment of 2.5sen/share for FY13, which is equivalent to a yield of 6.8%.

_ We maintain our target price of RM0.54/share based on 10x CY13 earnings. We like SKP and consider the company as a mini “cash cow”, which will attract shareholder buyout. Maintain Buy.


Good info.
First time visit your blog.

Kamsia, do come more often.

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