SINGAPORE (Oct 2): NRA Capital likes Sunningdale Tech, the precisions plastic components manufacturer, as the stock is trading at a discount of “attractive multiples” compared to its peers.
In a Monday report, analyst Tay Eng How reported that a scan was done on some locally listed service providers, including Venture, Hi-P, Valuetronics, Sunningdale, Fu Yu, Memtech and Fischer Tech.
Among them, Sunningdale stood out for its low price to earnings multiple of 7.79 times, compared to an average P/E of 13.46 times.
The group also reported a net profit growth of 115.2% in 1H17 to $15.9 million compared to $7.4 million a year ago.
See: Sunningdale 2Q earnings more than double to $8.2 mil
As revenue grew by only 6.6% y-o-y in 1H17, earnings growth was driven more by gross margin improvement, which coincided with the completion of the new manufacturing facility in Chuzhou, China, during 4Q16.
Based on an assumption of 6.6% revenue growth and gross margin of 15% in 3Q17, the analyst expects gross profit to increase by $3.1 million y-o-y in 3Q17, translating to 30% growth in core profit.
“Based on the adjusted net profit (as reported by the company) of $7.9 million in 3Q16, we can expect adjusted net profit of $10.3 million for 3Q17. Assuming similar earnings in 4Q17, we can expect full year adjusted net profit of $41 million, compared to $31 million in 2016 (+32%),” says Tay.
However, the 2H16 net profit reported included $14 million of net gains from non-operating items such as foreign exchange gains and gains on disposal of plant, property and equipment.
Hence, the reported headline growth in 2H17 may not be as high as 1H17 despite the high underlying operating net profit growth.
As at 11.56pm, shares in Sunningdale are trading 8 cents higher at $2.05 or 7.8 times price to earnings with a divided yield of 4.3%. The stock is also trading 86.36% higher YTD.
