KUALA LUMPUR (June 11): SAM Engineering & Equipment (M) Bhd’s shares climbed as much as 2.65% or 11 sen to RM4.26, after Insider Asia said the valuations of the company “remain attractive” in The Edge Financial Daily today.

At 3.46pm, SAM pared down some gains to trade 10 sen or 2.4% higher at RM4.25, giving it a market capitalisation of RM358.65 million.  

As comparison, FBM KLCI is at 1,734.58, down 1.19 points or 0.07%.

The stock hit a 15-year high of RM4.50.

Insider Asia said the company's strategy to venture into the aerospace industry in 2012, manufacturing engine-casings for aircrafts such as Airbus and Boeing, appears to be paying off,  in the face of a slowdown in that business.

“Moving forward, we believe SAM would continue to benefit from the still growing aerospace industry. It derived 63% of sales from aerospace in FY14 and aims to grow this segment to about 80%,” it added.

SAM is originally involved in equipment manufacturing and precision engineering for the semiconductor and hard-disk drive industry.

Its net profit improved by 12% to RM20 million in the financial year ended Mar 31, 2013 (FY13) after dipping in FY11-FY12 — and proceeded to grow by almost 50% to RM28.3 million in FY14 on the back of a 18.1% turnover increase to RM452.8 million.

The improvement was attributed, mainly, to its aerospace segment, which saw revenue rise from RM29.5 million to RM285.7 million.

In FY15, SAM’s net profit increased 22.3% to RM34.6 million, driven by higher contribution from the aerospace division.

The company has a debt-free balance sheet with cash of RM82.8 million at end-2014.

According to Insider Asia's report, the company has also raised its dividend payout ratio, in line with its improved earnings and cashflow.

It said the company’s dividends increased to 17.25 sen per share in FY14, equivalent to 51% of net profit, from 5.6 sen or 22% of profit in FY12,

“This translates into an above market average yield of 4.3%, at the current share price of RM4.00,” it added.

Insider Asia said the valuations remain "attractive" as the stock is currently trading at trailing 12-month price-earnings (P/E) of 9.8 times, low relative to its double-digit growth, and 0.90 times book value of RM4.46. Excluding cash, it would be trading at only 6.8 times historical earning.

SAM is a subsidiary of Singapore Aerospace Manufacturing Pte Ltd, which is, in turn, wholly-owned by Singapore’s sovereign wealth fund, Temasek Holdings (Private) Ltd.

The stock was selected as Insider Asia’s "Stock of the Day". Insider Asia's report is published in The Edge Financial Daily and theedgemarkets.com today.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)