RHB downgrades SKP as profit misses forecast

by **Cals** Fri 22 Nov 2013, 14:14

Business & Markets 2013

Written by Zatil Husna of theedgemalaysia.com

Friday, 22 November 2013 13:46

KUALA LUMPUR (Nov 22): RHB Research has downgraded its earnings forecast for SKP Resources Bhd after the firm reported weaker second quarter profit. RHB said SKP’s first-half earnings had missed estimates.

RHB has also downgraded its call on SKP shares to "sell" from "neutral". This comes with a lower fair value (FV) of 20 sen versus 37 sen previously for the plastic component manufacturer.

RHB said "we cut our FY14-15 net profit forecasts by 19.2% and 22.1% respectively.

“The company’s weak outlook, poor liquidity and the absence of an interim dividend prompts us to downgrade the stock to a "sell", with a lower FV of 20 sen.”

RHB said SKP’s valuations are rich amid murky earnings outlook, and poor liquidity.
“Although it is still cash rich, we feel that unless the company pays a special dividend, the stock will be short on re-rating catalysts,” RHB said.

Yesterday SKP said net profit declined to RM7.28 million in the second quarter ended September 30, 2013 (2QFY13) from RM11.99 million a year earlier. Revenue fell to RM106.15 million from RM121.18 million.

Cumulative 1HFY13 net profit dropped to RM16.42 million from RM23.8 million a year earlier. Revenue was lower at RM214.45 million from RM243.9 million.

RHB said : “We are concerned by the drop in sales to Dyson, which by itself contributes 55% of total sales.

“While SKP has other customers for video and computer plastic parts, sales do not appear to be growing fast enough to compensate for the drop in Dyson’s orders."