Author: itjustabouttheprofit | Publish date: Sat, 5 Sep 2015, 12:21 AM
EPS estimation : 13.70+18.25+15.71+20
(estimated) = 67.66sen
PE ratio : 15 (higher PE ratio due to stable
income in the next 5 years, pure cash
company with no debt and high dividend
yield)
Target price : RM10.15 (3 to 6 months)
Why SAM? (Updated version)
1) Total order books of RM4.5 billion for
the company (Aerospace+Equipment
Manufacturing+Precision Engineering)
2) Recover in Equiment Manufacturing
sector
3) Appreciation in US dollar
4) Strong balance sheet of RM116million
cash with zero borrowing, dividend yield of
6.5%
5) AGM update
the company (Aerospace+Equipment
Manufacturing+Precision Engineering)
As per annual report pages 8, the company have RM3 billion order book in aerospace product. On 28 Aug 2015, the company website have announced that the company have secured another RM520million contract in aerospace product.
http://www.sam-malaysia.com/wp-content/uploads/2015/08/Latest-News_28-Aug-2015.pdf
Also, from the information from chief executive officer, the company have another RM1 billion in equipment manufacturing and precision engineering sector. The breakdown are as below:
Calculations are as follows:
| RM | |
| Total order book as per annual report 2015 | 3,000,000,000 |
| Order book from equipment manufacutring and precision engineering (information from AGM) | 1,000,000,000 |
| New contracts on 28/08/2015 | 520,000,000 |
| Total order book as per 28/08/2015 | 4,520,000,000 |
With the RM4.52 billion order book, the company will able to maintain revenue for the latest quarter, which is RM134million for 8 years!!! (32quarters x 134 = RM4.288 billion)
sector
From the AGM, chief executive officer, Mr Jeffrey Goh Wee Keng have highlighted that the equipment manufacturing sector have been recovered from downturn. As mention by him, equipment manufacturing sector have faced downturn during financial year 2013 and 2014 due to flood incurred on Thailand on 2011. On 2012, the company received huge order on equipment sector. It caused the company's earning spiked during Mar 2012 and June 2012.
With the huge order in Mar 2012 and June 2012, the equipment sector have incurred downturn during 2013 and 2014. According to Mr Jeffrey, the equipment started to recover during 2015. It have reflected in latest quarter result.
30 June 2015
30 June 2014
As per quarter result above, we have noticed that the equipment manufacturing sector have jumped doubled on 30 June 2015.
3) Appreciation in US dollar
Refer to Q4 FY2014 and Q1 FY2015, exchange rate traded between USD1= RM3.5 to RM3.75. For Q2 FY2015, the USD spike up to USD1 = RM3.75 to RM4.25.
As the selling price determined in US dollar, the increased in currency rate will further improved the revenue and earning for the company as most of the business trading in US dollar.
cash with zero borrowing, dividend yield of
6.4%
Currently, the company stood at RM116million cash which is RM1.37!! Also the company did not have any borrowing. Also the company rewarded the shareholders with 6.4% dividend to shareholders.
Here is some of the useful information getting from attending the AGM:
1) The management planned to expand the production by building another factory at Batu Kawan. The factory expected to start operation during 2017.
2) The new factory expected to reach full capacity in 2020.
3) SAM is currently stood at 30% market share in engine casing industry in the world. SAM have 3 competitior. One from France, one from South Korean and another one from Taiwan.
4) The second largest shareholders have higlighted the illiquidity of the share. He proposed the company to have bonus issue and share split to increase the number of shares of SAM. Management said they will consider on the proposal.
5) The second largest shareholders also concern as the company holding too much cash. The management replied that the company will used the cash for acquisition of new business, growing of business and buying raw material.
6) The second largest shareholders to ask to reward the employees as the employees are skilled employees. He also suggest to the management to split the dividend in 2 times.
7) The management forecast that the company are able to archieve RM550million revenue this year.
8) The company will invest USD50million between 2015 to 2020 for the purchase of fixed assets.
9) The company hired more staffs during the year compare to last year as equipment manufacturing sector recovered during 2015.
10) Most of the cash are kept in US dollar as most of the transaction traded in US dollar.
After the AGM, the management have arranged factory tour for shareholders of the company for aerospace factory. Due to the employee not allowed us to take photo inside the production line, hence I am unable to take any photo inside the factory. These is some of the picture I am able to snap during the factory tour.
This engine costs around USD400,000 per pieces according to one of the employees (right side). Hence we walked with extra care during the factory tour to make sure the engine case did not suffer any scratches or damages.
Trade at your own risk!!! Do research before any investment decision!! Happy trading :-)
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