For QE31/12/2016, SAM's net profit was mixed- rose 92% q-o-q but declined 4% y-o-y - to RM15.2 million. Revenue was similarly mixed- rose 9% q-o-q but declined 15% y-o-y - to RM132 million.
Table 1: SAM's last 16 quarters' P&L
Revenue dropped y-o-y mainly due to the decrease in revenue from the Equipment Manufacturing and Aerospace segments. Revenue from the Equipment Manufacturing segment was lower by RM16.4 million as a result of weaker demand from customers. Revenue from the Aerospace segment decreased by RM9.2 million due to the lower demand for air cargo and business jets. On the other hand, revenue for the Precision Engineering segment increased by RM3.1 million during the quarter.
The Group profit before tax dropped mainly due to lower Group revenue and new projects start-up cost. This was partially mitigated by the favorable change in the product mix in the Equipment Manufacturing segment resulting in higher profit margin and lower expenses in the aerospace segment.
Table 2: SAM's segmental results for QE31/12/2016
Graph 1: SAM's segmental results for last 7 quarters' P&L
Graph 2: SAM's last 24 quarters' P&L
SAM (closed at RM5.57 yesterday) is now trading at a PER of 16.5x (based on last 4 quarters' EPS of 33.8 sen). At this PER, SAM is deemed fully-valued.
SAM staged a rebound in the past 6 weeks which brought the share price nearly back to its downtrend line. Since then, SAM has slid back to the support of RM5.50-5.60. If it can hang onto that support, it may trade sideways while it awaits its "huge" aerospace contracts to bear fruits. If it cannot hold onto the support of RM5.50-5.60, then it may revisit the recent low of RM5.00. The amount of aerospace contracts backlog is estimated to be about RM3.5 billion as per its August 2016 Shareholders' Presentation (here).
Chart: SAM's weekly chart as at Jan 6, 2017 (Source: ShareInvestor)
Despite its full valuation and negative technical outlook, I'm maintaining my rating for SAM as a HOLD in view of the "huge"contract backlog.