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PostPosted: Wed Jul 25, 2018 8:40 am
by winston
not vested

Trading Buy: SALUTE - 0183
(Last price: RM0.575, Potential upside +34.8%)

Company Profile

• SALUTE manufactures electronic products, specializes in consumer and business electronic product development such as Bluetooth stereo headsets, smart watches and precision light guides for optical touch screen systems.

Trading Catalyst

• Despite potential earnings hiccup in 4QFY6/18 (mainly due to higher R&D and new platform expenses for new products), we believe the 61% plunge in share price is overdone, supported by undemanding 12.6x FY19 P/E (30% below historical P/E of 18x since listed and 10% discount to its peers), a strong FY18-20 EPS CAGR of 31% and attractive 5.9%-6.6% FY19-20 dividend yields.

• Downside risk is cushioned by recent USD strength (vs RM), company’s share buy-back mandate and solid net cash ~RM74m or 19sen/share (after deducting the balance of RM14m capex from IPO proceeds).

• Bullish downtrend line breakout to retest RM0.70-0.775 zones.

• We see better performance in FY19-20, premised on more new models coming up from key customers and its close associations with both its existing customers and potential new customers to co-develop and plan a slate of new innovative products and technology offerings over the medium to long term.

Technical View
• Resistance: RM0.630 / RM0.700 / RM0.775
• Support: RM0.540 / RM0.500
• Cut loss: RM0.495

Key Financial Stats
• Trading at 12.6x FY19E P/E (10% below peers) with 31% FY18-20 EPS CAGR
• Strong net cash of RM0.19/share or 33% of share price.

Source: HLIB