Author: itjustabouttheprofit | Publish date: Sat, 20 Jun 2015, 05:31 AM
EPS estimation : 18.25 x 4 =73sen
PE ratio : 15 (higher PE ratio due to stable
income in the next 5 year, pure cash
company with no debt and high dividend
yield)
Target price : RM10.95 (might be more in
long term)
I am here to ANSWER a simple question. Why
SAM?
1) Strong order books of RM3billions keep the
company busy until 2026
2) Management determination - Become global
player with annual revenue more than
RM1billions
3) Strong balance sheet -RM103millions cash
with zero borrowing, dividend yield of 4.14%
4) Reputable customers, GE Aviation. subsidiary
of General Electric, which is listed company
in Dow Jones index
Introduction
On 27 September 2012, SAM Engineering &
Equipment (M) Berhad have completed the
acquisition of the entire issued and paid-up
capital for Avitron Pte Ltd from Singapore
Aerospace Manufacturing Pte Ltd for
RM135millions.
After the acquisition, it began the new chapter
for SAM Engineering in aerospace industries.
There are three main business involvement:
a) Aerospace (69% of total revenue)
b) Equipment Manufacturing (24% of total
revenue)
c) Precision Engineering (7% of total revenue)
According to annual report 2014, Temasek
Holdings (Private) Limited (investment company
for Singapore government) owned 74.18% of
indirect interest in SAM Engineering & Equipment
(M) Berhad.
1) Strong order books of RM3billions keep the
company busy until 2026
http://www.thestar.com.my/Business/Business-News/2014/09/08/SAM-plans-to-grow-via-additional-investments-and-acquisitions/?style=biz
From the Star report as at 8 September 2014, the company already have RM2billions orderbook on September 2014.
http://www.sam-malaysia.com/wp-content/uploads/2015/06/Latest-News_17-June-2015.pdf
http://www.sam-malaysia.com/wp-content/uploads/2015/05/Latest-News_26-May-2015.pdf
Refer to the link above, Avitron Pte Ltd, wholly-owned subsidiaries of the company have receivedRM450millions contracts from GE Aviation on 26 May 2015 and RM900millions contracts fromGE Aviation on 17 June 2015. These brought the company currently stood at RM3billions order book.
Calculations are as follows:
RM'000
Total order book as per Sep 14 2,000,000
Revenue as per 30/09/2014 (112,328)
Revenue as per 31/12/2014 (113,542)
Revenue as per 31/03/2015 (132,493)
New contracts on 26/05/2015 450,000
New contracts on 17/06/2015 900,000
Total order book as per 17/06/2015 2,991,637
The order book of RM3billions will keep the company busy until 2026.
With the RM3billions order book, the company will able to maintain revenue for the latest quarter, which is RM132million for 5 and a half year!!! (5.5 x 4 x 132 = RM2.904billions)
2) Management determination - Become global
player with annual revenue more than
RM1billions
Refer to the annual report 2014, the company management planned to target annual revenue of RM1billions in the next 2 to 3 years. For year 2015 (up to 17/06/2015),the company have received order book of RM1.35billion (as stated above). These marked the management determination toarchieve the target annual revenue of RM1billion, which is 121% inceased in total revenuefrom rolling revenue for the past 4 quarters!! From The Star news above, the management also stated that they are targetting to become the leading player in Asia Pacific in aerospace industry.
3) Strong balance sheet -RM103millions cash
with zero borrowing, dividend yield of 4.14%
As per latest quarterly report, the company held RM103millions of cash and cash equivalents, which is RM1.23 per share!! Other than that, the company have zero bank borrowing and RM79million of trade and other payables. Net assets for the company stood at RM4.46 per share.
Also, the company have declared RM0.1725 per shares of final and special dividends during 2014, which translated to 4.14% of dividend yield. For financial year 2015, the company expected to declare the dividend during July 2015, which is one month from now. As the company's profit grew for current financial year, hence we expected a better dividend payout for this year.
4) Reputable customers, GE Aviation, subsidiary
of General Electric, which is listed company
in Dow Jones index
The main customer of the company, GE Aviation, which is among the top aircraft engine suppliers and offers engines for the majority of commercia aircraft in the world.
GE Aviation is one of the subsidiaries for General Electric Company which is listed in the Dow Jones Index (top 30 largest company in term of market value in US).
https://www.ge.com/sites/default/files/ge_webcast_pressrelease_01232015_1.pdf
According to the quarterly report for General Electric Company. GE Aviation have contributed USD24billions revenue during financial year 2014 for General Electric Company.
5) Strong currency exchange against ringgit lead
to increase in total revenue
As most the contract signed in US dollar (refer to the attachment for the latest contract on 17 June 2015 and 26 May 2015), we expected the total order book will increased (in term of ringgit) as ringgit have been depreciation about 10% to 20% during 2015.
Trade at your own risk!!! Do research before any investment decision!! Happy trading :-)
