Sunright

KESM's full year result

http://www.bursamalaysia.com/market/list..._code=9334

This article first appeared in The Edge Financial Daily, on September 23, 2016.


KESM Industries Bhd
(Sept 22, RM7.79)
Maintain buy with unchanged target price (TP) of RM11: KESM Industries Bhd’s (KESM) financial year 2016 (FY16) core profit of RM31 million, which grew 69% year-on-year (y-o-y), was within expectations. The stronger earnings y-o-y were underpinned by growth in the automotive testing business, with KESM testing micro controller units and sensors among others, largely for the automotive integrated device manufacturers (IDMs). KESM looked to expanding its testing business three years ago with major investments made in this space. These are currently bearing fruit. As a result, revenue grew 9% y-o-y to RM286 million. Alongside revenue growth, FY16 earnings before interest, taxes, depreciation and amortisation (Ebitda) margin also expanded by 0.3 percentage points (ppts) y-o-y to 32.2%, as contribution from the higher-margin testing business increased. FY16 earnings growth would have been higher if not for a higher effective tax rate of 15.3% against FY15’s 12.9%. Separately, the company also announced a final dividend per share (DPS) of three sen, bringing FY16 DPS to 7.5 sen as compared with the six sen in FY15. However, this was below our forecast of 10.4 sen. We suspect that the company is reserving cash for future capital expenditure, and that it also repaid borrowings of RM35 million during the financial year.

Sequentially, fourth quarter of FY16 (4QFY16) core profits slipped 2% due to a softer Ebitda margin with a decline of 1.3ppts quarter-on-quarter (q-o-q). We believe this could be due to product mix, possibly an increase in its box build business which typically carries lower margins. On the other hand, revenue momentum remains strong, rising 5% q-o-q to RM75 million, its strongest ever.

No major changes to our FY17-FY18E (estimate) earnings per share (EPS) forecasts. We introduce FY19E EPS of RM1.29, which represents a 26% growth y-o-y. We continue to believe that KESM is in the position to benefit from the strong growth in the automotive semiconductor segment, underpinned by rising electronic content, from safety to infotainment and autonomous vehicles. Maintain “buy” and TP of RM11 with 12 times calendarised 2017E EPS which offers 38% upside potential. — Affin Hwang Investment Bank, Sept 21, 2016

check out the dividend they give

stock chart of Sunright's 48% subsidiary:

https://www.google.com.sg/search?client=...ugTx94vABA

KESM price has move up significantly over the past 18months, its 48% stake in KESM now is worth $0.44 per Sunright shares, compares favourably with Sunright current price of $0.30

Sunright's adjusted net cash per share (cash less financial borrowings adjusted for KESM non controlling interest portion) is abt $0.30

Sunlight's adjusted NCAV, Net Current Asset Value (adjusted for KESM non controlling interest portion) is ard $0.32

Value or value trap???

Market has voted with its feet, closed this week at 42ct, around the net cash per share that appear in analyst report

My take on why it has moved out of deep value zone (around the 30ct level) in 1 week is due to the current market sentiment towards semicon players in SGX and a very good set of result announced by its subsi KESM

http://disclosure.bursamalaysia.com/File...TTACHMENTS

The issue with Sunright remains with the lack of profitability of its equipment biz and the lack of willingness of company to believe in investor relations, without either which Sunright's will unlikely realise its fair value, which I speculate to be above its NAV

http://www.thestar.com.my/business/busin...get-price/

Yah market is funny, semicon been booming since mid last year as dram prices soared.

Only now suddenly analyst so bullish as good results coming in. Avitech has been going up a lot as well.


Probably time to start selling semicon stocks into strength. Market a bit irrational now. Prices of dram have sort of flattened at the peak past few weeks, could be a big drop soon.

Sunright mgt. Doesn't seem friendly to opmi. That's one of reason why didn't pick this one up despite the severe undervaluation previously.

Sent from my MotoG3 using Tapatalk

Sunright owns 20.825m shares of KESM. At last Friday closing price of RM$10.80, the stake in KESM is valued at RM$224.91m or SS71.4m (Malaysian Ringgit to Singapore Dollar-3.15).

There are 122.8m shares in Sunright. Hence the stake in KESM is worth around S$0.58

http://www.bursamalaysia.com/market/list...ts/5361353

(11-03-2017, 08:11 PM)Behappyalways Wrote: Sunright owns 20.825m shares of KESM. At last Friday closing price of RM$10.80, the stake in KESM is valued at RM$224.91m or SS71.4m (Malaysian Ringgit to Singapore Dollar-3.15).

There are 122.8m shares in Sunright. Hence the stake in KESM is worth around S$0.58

http://www.bursamalaysia.com/market/list...ts/5361353

Yes my working show its stake in KESM worth S$0.58 per Sunright share too, it was up from S$0.44 per Sunright share in Sep 2016

KESM doing well does not mean Sunright's P/L will be good. But end of last fiscal year, the management did some rationalisation in the company. Let's see how the 1st half result will be after the rationalisation