SAM Engineering & Equipment expects lower equipment sales, says CGS-CIMB Research

SAM Engineering & Equipment (M) Bhd, the Malaysian-listed subsidiary of a Singapore parent servicing the precision and equipment markets, is expecting lower sales in the next few months.

Its management has turned cautious on the company’s second half of its 2023 financial year (2H23), which runs from October 2022 to March 2023, in view of softer consumer electronics demand amid rising inflationary pressures and interest rates.

“The group expects lower equipment sales in view of softer demand, in line with the slowdown in the global semiconductor industry. This, in turn, could translate to lower sales of data storage equipment,” according to CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research) in a company note released today.

The Bayan Lepas, Penang-based company expects the majority of equipment sales in the 2H to come from the front-end semiconductor equipment segment, in line with rising fab spending. The group estimates that the slowdown in the equipment division could last for the next six to nine months.

The details were shared at SAM Engineering & Equipment’s post-results briefing yesterday, hosted by CEO Peter Lim.

In view of the development, CGS-CIMB Research has maintained its ‘Reduce’ call on the company’s stock with an unchanged target price of RM4.90. The stock was trading at RM5.24 at 11.40pm today, giving it a market capitalisation of RM2.84 billion.

SAM Engineering & Equipment posted a net profit of RM26.94 million for the second quarter ended Sept 30, 2022 (2Q23), up 63% from the same quarter last year, on the back of revenue of RM406.52 million which was 73% higher. For the 1H, it posted a net profit of RM50.47 million on RM760.49 million in turnover.

The 2Q23 revenue increase came from higher revenue from the aerospace segment due to increase in sales of casing and aerostructures products, as well as increase in demand from the semiconductor customers and favourable foreign exchange translation, it told the local stock exchange in a filing yesterday. 

SAM Engineering & Equipment, a subsidiary of Singapore Aerospace Manufacturing Pte Ltd, has manufacturing facilities in Malaysia, Singapore and Thailand to provide one-stop solutions to its customers worldwide. Its services range from precision machining, sheet-metal fabrication and surface treatment, to equipment integration and automation solutions. Singapore Aerospace Manufacturing is a subsidiary of Accuron Technologies Ltd and headquartered in Singapore. — TMR / pic source: sam-malaysia.com