Sam Engineering soars 26% this week as investors sniff out proxy to COVID-19-fuelled thematic play

Sam Engineering soars 26% this week as investors sniff out proxy to COVID-19-fuelled thematic play
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KUALA LUMPUR (June 19): Sam Engineering & Equipment (M) Bhd seems to be another stock that is on COVID-19-fuelled thematic play on Bursa Malaysia.

The company’s share price shot up 7.4% to an intra-day high of RM7.14 today as investors are sniffing out companies that are involved in personal protective equipment (PPE) such as rubber gloves and medical equipment supply. Furthermore, it is also a semiconductor-related stock.

The stock finished the week at a three-month high of RM7.07. This week alone, it has soared 26% from RM5.60 on Monday. Sam Engineering has, indeed, climbed 59% from the low of RM4.45 on March 19. However, year to date, the stock is still down by 11%.

Sam Engineering, which experienced a slow down in its aerospace business, is hopeful that its equipment business will have brighter prospects ahead.

In its result announcement, the company said its outlook for the equipment business remains strong, largely driven by increased demand from the medical, telecommunications and the electronics industries.

“Over the last two months, the equipment division has been ramping up its production capacity to recover from previous mandated facility closures and support customers demand increase.

“We have been actively redeploying excess resources from the aerospace business to support the equipment business. Concurrently, we are working closely with equipment customers to explore more business opportunities, to back-fill sales drops from the aerospace business,” the company said.

Mercury Securities Research, which has a “buy” recommendation on SAM Engineering, said in a note dated June 10 that the group's FY20 results were within its expectation, accounting for 109% and 96% of its full-year revenue and net profit estimates respectively.

The research house is expecting strong semiconductor demand to offset sluggish aerospace segments while it also expects the equipment segment to drive SAM Engineering's growth in FY21.

However, it has lowered its target price to RM7.60 from RM11.30 previously, after accounting for the lower price-earnings ratio (P/E) of 11 times on its estimated earnings per share (EPS) for FY21, down from 18 times P/E based on EPS for FY20.

On June 5, the group reported a 1.7% increase in net profit to RM79.82 million for the full financial year ended March 31, 2020 (FY20) versus RM78.51 million for FY19. Revenue rose 24% year-on-year to RM938.66 million. Earnings per share came in at 59.06 sen versus 58.09 a year ago.

Its board of directors has declared the first single tier dividend of 14.76 sen, payable on Aug 26.