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SAM is down 17.89% year-to-date, trading at RM3.78. Despite annual revenue of RM1.48 billion, FY2025 projections have been lowered to RM1.6 billion with an EPS of RM0.14. With a P/E of 26.89x, the stock appears overvalued given the expected 10% EPS growth. The target price is RM4.60, but caution is advised given current market conditions.
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Despite a decline in net profits for its quarterly and half-year periods, Sam Engineering and Equipment (M) Bhd’s long-term outlook remains intact due to multiple factors.
Hong Leong Investment Bank (HLIB) Research liked the company, given its strong exposure to the ultra-fast-growing aerospace and semiconductor industries, which it deemed complementary for long-term growth.
“SAM is a highly rare secular growth stock and we are positive on it. This is due to the global semiconductor industry, which is gradually recovering from the inventory correction cycle, and aerospace is turning around strongly as global air passenger travel has recovered to more than 99% of pre-Covid-19 pandemic levels.
“While the group’s Thailand expansion will take time before breaking even, we are encouraged by the narrowing losses in each subsequent quarter,” it noted.
SAM reported a 23.7% year-on-year (y-o-y) drop in net profit for the second quarter of financial year 2025 to RM24.9mil, translating into an earnings per share of 3.68 sen, while revenue decreased by 13.6% y-o-y to RM370.2mil.
The company’s weaker topline performance was due to a decline in the equipment segment, which recorded RM79.1mil in revenue following lower demand from the semiconductor and data storage customers, as well as unfavourable foreign-exchange translation.
For the first six months ended Sept 30, 2024, SAM’s net profit dropped 34.2% y-o-y to RM35mil, while revenue was also down 4.5% y-o-y to RM703.6mil.
HLIB Research maintained its “hold” stance on the stock with a lower target price of RM4.59 from RM4.98 previously, pegged to an unchanged price-earnings multiple of 28 times the financial year 2026 forecast earnings per share.
This reflects the stock’s current parity with its domestic-listed peers, as the brokerage factors in the impressive recovery in its aerospace segment over the past two quarters.