SKP Resources sees RM2.3b annual sales by FY17

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This article first appeared in The Edge Financial Daily, on September 28, 2015.

Gan: For FY16, we will probably do RM1.3 billion. Photo by Patrick Goh

KUALA LUMPUR: Electronics cum plastic parts manufacturer SKP Resources Bhd expects to achieve an annual revenue of RM2.3 billion by the financial year ending March 31, 2017 (FY17), with a targeted average profit margin of 7.5%.
“We just closed FY15 with about RM600 million [revenue]. For FY16, we will probably do RM1.3 billion, and then followed by about RM2.3 billion in FY17,” the group’s executive director Ivan Gan Poh San told The Edge Financial Daily after the group’s annual general meeting last Friday.

Gan explained that FY16 sales would be driven by consolidation of the businesses that it had acquired from sister company Tecnic Group Bhd, which was just concluded earlier this year.

The move was to enable SKP Resources to transform into a more diversified player in the plastics industry.

The group is justifiably confident about its FY17 target as it has already clinched two five-year contracts this year totalling RM5 billion from its major customer, British-based Dyson Ltd.

Recall that on May 18, the group bagged a RM2 billion job from Dyson to manufacture the latter’s new cordless vacuum cleaner. The contract, which spans five years and begins from October, is worth RM400 million per annum.

On Sept 14, SKP Resources secured another RM3 billion contract from Dyson, scheduled to start in January 2016 — again with a tenure of five years — worth RM600 million per annum for the same product.

Further, Gan, who is also son of SKP Resources and Tecnic’s common controlling shareholder Datuk Gan Kim Huat, revealed that SKP Resources’ current average profit margin across all its assembly lines is about 7% to 7.2%, and that the management intends to raise the figure to 7.5% by FY17 by enhancing the group’s production efficiency.

“As of now, we are not in talks for additional orders yet. This is because we are putting more attention on the businesses on hand as the company has grown so much [after acquiring Tecnic’s businesses],” Gan said when asked if SKP Resources is in any talks for more jobs.

“Of course we will still proactively seek to replenish our orders, but with this significant growth of business size, we will concentrate on more improvements [in efficiencies] first,” Gan said.

SKP_price-chart

Still, Gan said there is potential for more jobs from Dyson, as the latter is investing £1.5 billion (RM10.02 billion) into research and development over the next four years.

“This will indirectly create a lot of new products, so these will be things that hopefully SKP Resources can work with them on,” he added.

Following the acquisition of Tecnic’s businesses, SKP Resources has broadened its customer base to include Exxon Mobil Corp, Petroliam Nasional Bhd, Nestle (M) Bhd, Unilever plc, Sony Corp and Panasonic Corp.

For the first quarter ended June 30, 2015 (1QFY16), SKP Resources’ net profit jumped 85.55% year-on-year to RM17.9 million from RM9.65 million. Revenue ballooned 84.51% to RM243.06 million from RM131.74 million in 1QFY15.

Last Friday, SKP Resources shares (fundamental: 2.1; valuation: 1.1) closed unchanged at RM1.35, with a market capitalisation of RM1.46 billion. Year to date, its share price, which was trading at 64 sen on Dec 31, 2014, has more than doubled.


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