COMPANY UPDATE

TA Securities
A Member of the TA Group
Monday, January 19, 2015
FBMKLCI: 1,743.57
Sector: Technology

MENARA TA ONE, 22 JALAN P. RAMLEE, 50250 KUALA LUMPUR, MALAYSIA TEL: +603-20721277 / FAX: +603-20325048

SKP Resources Berhad

TP: RM1.10 (+48.6%)

Last traded: RM0.74

Marching Forward

BUY

THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*

Paul Yap

Tel: +603-2167 9603

paulyap@ta.com.my

Resolution Approved
To recap, in October 2014, SKP announced the proposed acquisition of Tecnics
subsidiaries for a purchase consideration of RM200mn. During a recent EGM,
shareholders of both companies accepted the proposal placing the deal one
step closer towards completion. The remaining condition precedents are: 1)
Approval or notification to MITI; 2) Consent by creditors and/or lenders of the
Tecnic and SKP and 3) Sanction from the High Court of Malaya on the capital
reduction of Tecnic. Absent delays, completion of the proposed acquisition
remains on track for 1QCY15.
Factory on Track
Construction of its fifth factory is on progress for delivery on March 2015. This
will help boost current production capacity by 75%. However, introduced in
phases over three years, only the first floor of facilities will be utilised. New
capacity should help cater for a ramp up in demand for Dyson related products.
Both Factors to Drive Earnings
Combined, the factors above will augur well for earnings in FY16. Our current
forecast suggests an EPS growth of 65.3% YoY. Supplemented by its high
dividend payout ratio of 50%, this points to a potential DPS of 3.4sen. At its
current market price, forward dividend yield remains decent at 4.6-5.7%.
Margins Protected
Fluctuations in the USD/MYR rate and resin prices are expected to have a
neutral impact. For its largest customers, we understand that the company has
adopted a cost pass through mechanism. Prices are usually revised on a
monthly basis, negating the impact of potential cost savings and increases.
However, in the event of sharp fluctuations, it may be exposed to short term
impacts.
Valuation
Leave our TP for SKP Resources unchanged at RM1.10/share based on a PE of
14x and CY16 EPS of 8.0sen. At current levels it is trading at a forward CY15 PE
of 11.9x. In our opinion, this is undemanding due to its: 1) Earnings growth
potential of 22.0-65.3%; 2) Solid dividend yield of 4.6-5.7% and 3) High ROEs
of approximately 20%. Maintain our BUY recommendation on SKP Resources.

Share Information
Bloomberg Code
Stock Code
Listing
Share Cap (mn)
Market Cap (RMmn)
Par Value
52-wk Hi/Lo (RM)
12-mth Avg Daily Vol ('000 shrs)
Estimated Free Float (%)
Beta
Major Shareholders (%)

SKP MK
7155
Main Market
900.0
666.0
0.10
0.79/0.305
4167.5
0.3
0.95
Gan Kim Huat - 67.0

Forecast Revision
Forecast Revision (%)
Net profit (RMmn)
Consensus
TA's / Consensus (%)
Previous Rating

FY15
FY16
45.0
86.2
45.7
77.2
98.6
111.7
Buy (Maintained)

Financial Indicators
Net Debt/Equity (%)
CFPS (sen)
Price/CFPS (x)
ROE (%)
NTA/Share (RM)
Price/NTA (x)
Share Performance (%)
Price Change
1 mth
3 mth
6 mth
12 mth

FY15
Net Cash
3.0
24.9
15.5
0.3
2.2

FY16
Net Cash
(4.2)
(17.5)
20.0
0.4
1.8

SKP
15.6
2.8
25.4
138.7

FBM KLCI
(1.0)
(6.0)
(6.8)
(3.4)

(12-Mth) Share Price relative to the FBM KLCI

Source: Bloomberg

Page 1 of 2

www.taonline.com.my

TA Securities

19-Jan-15

A Member of the TA Group

Table 1: Earnings Summary (RMmn)

FYE March 31 (RMmn)

FY13

FY14

FY15F

FY16F

FY17F

Revenue

423.3

412.8

540.0

908.8

1,084.5

EBITDA

62.4

48.0

70.6

130.6

158.9

EBITDA margin (%)

14.7

11.6

13.1

14.4

14.7

Pretax profit

53.8

39.8

60.0

114.9

140.2

Net profit

39.6

29.3

45.0

86.2

105.1

Core net profit

39.6

29.3

45.0

86.2

105.1

EPS* (sen)

4.7

3.3

4.2

6.9

8.4

EPS growth (%)

13.7

(30.1)

27.8

65.3

22.0

PER (x)

15.9

22.7

17.8

10.8

8.8

GDPS* (sen)

2.2

1.7

2.1

3.4

4.2

Div yield (%)

3.0

2.3

2.8

4.6

5.7

20.9

14.0

15.5

20.0

19.9

ROE (%)

*Adjusted for 1:2 bonus issue in FY13

Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are
subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any
direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies
mentioned herein.
This report has been prepared by TA SECURITIES HOLDINGS BERHAD for purposes of CMDF-Bursa Research Scheme ("CBRS") administered by Bursa Malaysia Berhad and
will be compensated to undertake the scheme. TA SECURITIES HOLDINGS BERHAD has produced this report independent of any influence from the CBRS or the subject
company.
For more information about CBRS and other research reports, please visit Bursa Malaysias website at:
http://www.bursamalaysia.com/market/listed-companies/research-repository/research-reports
for TA SECURITIES HOLDINGS BERHAD(14948-M)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
Kaladher Govindan Head of Research

Page 2 of 2