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SMPC Corporation Bhd

SMPC Corporation Bhd (SMPC) is one of the largest steel service centres in Malaysia, with a market capitalisation of RM53.8 million. It is principally involved in the manufacturing and trading of steel coils, tubes, strapping and steel furniture as well as metal roofing, floor decking and perforated metal. 

Products include hot and cold rolled steel sheets, galvanized iron sheets and stainless steel. 

At RM1.03, its shares are trading at comparatively low valuations — at just about half its book value of RM2.13, as at end-June 2014.

SMPC’s earnings, however, have been erratic, despite steadily increasing revenue — from RM109 million in FYMarch2010 to RM143.6 million in FY14. The company was in the red in FY10-FY11 and FY13. This was likely due to difficult operating conditions within the entire steel industry as well as the company’s relatively high fixed costs and interest expense. It reported a net profit of RM17.9 million in FY12, but this was boosted by waiver of debts of RM64.5 million as part of its debt restructuring exercise. 

On a positive note, following the debt restructuring exercise, gearing now stands at a modest 16.7% or net debt of RM18.7 million. SMPC’s underlying earnings appear to be on the mend. It returned to the black in FY14 and 1QFY15 with net profit of RM2.9 million and RM1.2 million, respectively.

In line with the stronger earnings, SMPC paid dividends of 4 sen per share in FY14, which gave investors a fairly decent yield of 3.6%. 

Investors should bear in mind that the stock can be illiquid, though volume has picked up some in the past few weeks.


This article first appeared in The Edge Financial Daily, on October 10, 2014.

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