SKP Resources

[winston]

not vested

KALADHER GOVINDAN
Head of research, TA Securities
Stock pick: SKP Resources Bhd

EXCITEMENT in a company’s shares always hinges on its track record, ability to deliver strong earnings growth and generate cash flows to reward shareholders with dividends.

SKP Resources Bhd fits this bill. Despite reporting a profit growth of 43% in the last financial year, the company is expected to record a 3-year earnings CAGR of 68.2% until 2018 based on our projections.

This growth will be underpinned by the RM1bil annual orders from its main customer, Dyson, to produce cordless vacuum cleaners. Considering this new source of demand is only taking up about 25% of its newly enlarged 20-assembly line facility that came on board last September, growth potential is enormous. Dyson plans to launch 100 new products by 2018 to satisfy increasing demand for its products and services.

SKP has also mitigated operational risks by having specific agreements with clients to pass through nearly 100% of costs related to changes in raw material prices and currency fluctuations. This not only provided business stability but also some predictability.

SKP has a high ROE of 40% and a strong balance sheet. With current net gearing of only 4.5%, it is expected to turn net cash soon on the back of strong profit growth and cash flows. Thus, our expectations for future dividend yield to remain attractive around 4.6% to 6% are not far-fetched.

While having Dyson as a single largest customer can be considered as a major risk, the management is aware of that and has taken a proactive step by acquiring the subsidiaries of Technic to diversify the product range and customer base. It has also succeeded in growing the business through a win-win strategy that has strengthened the relationship, for the partnership to continue into distant future.

The fair value ascribed to SKP Resources shares is RM2 based on a calendar year (CY) 2016 price earnings (PE) multiple of 18 times, which will dwindle to 16 times and 10 times in CY17 and CY18 respectively on the back of robust earnings growth.


Source: The Star

[winston]

not vested

EPF substantial shareholder in SKP Resources

KUALA LUMPUR: The Employees Provident Fund Board (EPF) has emerged as a substantial shareholder in SKP Resources Bhd with a 5.01% stake.

A filing with Bursa Malaysia on Friday showed the EPF had bought 700,000 shares or 0.063% of the plastic moulding company, which is located in Johor, on Wednesday.

The recent acquisition saw its shareholding increase to 55.73 million shares and triggering the 5% level as substantial shareholder.

In September 2015, SKP Resources disclosed its five-year contract from its existing customer Dyson Ltd wasworth RM600mil a year.

It told Bursa Malaysia that the tenure was for five years and valuing the contract at RM3bil.

The contract is for manufacturing Dyson’s cordless vacuum cleaners and it was scheduled to start in January 2016.

SKP, one of Dyson’s contract manufacturers in Malaysia, assembles a range of Dyson products, including upright vacuum cleaners, hand dryers and bladeless fans.

Source: The Star

[winston]

not vested

EPF substantial shareholder in SKP Resources

KUALA LUMPUR: The Employees Provident Fund (EPF) Board has emerged as a substantial shareholder in plastic moulding company, SKP Resources Bhd with a 5% stake.

A filing with Bursa Malaysia on Friday showed it was triggered after the EPF bought 155,200 shares on May 3.

The transaction saw its shareholding rise to 5% or 56.353 million shares.

In September 2015, SKP Resources disclosed its five-year contract from its existing customer Dyson Ltd was worth RM600mil a year.

It told Bursa Malaysia that the tenure was for five years and valuing the contract at RM3bil.

The contract is for manufacturing Dyson’s cordless vacuum cleaners and it was scheduled to start in January 2016.

SKP, one of Dyson’s contract manufacturers in Malaysia, assembles a range of Dyson products, including upright vacuum cleaners, hand dryers and bladeless fans.

Source: The Star