not vested
Trading Buy: SUCCESS - 7207
*Brighter outlook after disposing low-margin process equipment business *
(Last price: RM0.915, Potential upside +20.2%)
Company Profile
SUCCESS (listed in Jan 2005) is principally engaged in design, manufacturing and distribution of electrical apparatus, industrial lighting, as well as process equipment (its entire 65% stake in SEB was disposed in Sep 2019 for RM26m).
Trading Catalyst
We are upbeat on SUCCESS for its sound fundamentals, experienced and hands-on (with an operational track record of ~40 years) management, positive outlook in line with the government’s ongoing push to adopt LED street lightings as well as achieving greater economies of scales and productivity after SEB’s disposal.
Valuation is undemanding at 8.7x FY20E (ex-cash P/E only at 5.9x), -28.7% lower than 5Y historical average of 12.2x), supported by decent 4.4% DY and strong 22% FY20-22 EPS CAGR coupled with net cash position of RM72m (29sen/share or 32% to share price).
Technically, Success is ripe for an oversold rebound towards RM0.99-1.10 levels after a brief sideways consolidation.
Technical View
Resistance: RM0.950 / RM0.990 / RM1.10
Support: RM0.900 / RM0.875
Cut loss: RM0.850
Key Financial Stats
FY20E P/E: 8.7x FY20E (ex-cash P/E only at 5.9x)
DY: 4.4%
Net cash position of RM72m (29sen/share or 32% to share price)
Source: Bloomberg, HLIB