SINGAPORE (Nov 9): CIMB is maintaining its “add” call on Sunningdale Tech with a lowered target price of $2.79.
This came after the group on Wednesday announced its 3Q17 earnings dropped 24.2% to $7.7 million due to forex losses and higher expenses.
See: Sunningdale's 3Q earnings fall 24.2% to $7.7 mil on forex losses, higher expenses
Revenue for the quarter was up 9.1% at $188.1 million from $172.5 million last year, fuelled by growth across all of the group’s segment.
The group’s cyclical mould fabrication segment increased 35.0% y-o-y to $36.0 million; automotive segment increased 2.5% y-o-y to $63.2 million; consumer/IT segment rose 5.6% y-o-y to $76.9 million; and healthcare segment grew 6.2% y-o-y to $12.1 million.
The mould fabrication segment registered the strongest revenue growth. However, it is a one-off business with no attendant injection moulding revenue and Sunningdale produces moulds for export and internal use.
In a Wednesday report, analyst William Tng says that this could have led to a temporary dip in gross margin to 14.32% in 3Q17 from 15.6% in 2Q17.
Meanwhile, unrealised exchange losses amounted to $3.1 million compared to a gain of $2.3 million from foreign exchange the previous year, due to the volatile USD.
However, the group says that business sentiment remains subdued and the overall economic landscape continues to present it with challenges across its global manufacturing operations.
While foreign exchange rate remains volatile and rising labour costs persist, the group continues to face pricing pressures from customers.
The group says that it will continue to focus its efforts on boosting productivity and enhancing operational efficiency to counter these challenges.
On the bright side, Sunningdale’s new manufacturing facility in Penang, Malaysia is scheduled to complete by end-1Q18. Coupled with new project wins from new and existing customers, it is adding capacity to its latest manufacturing plant in Chuzhou, China.
“The group remains cautiously optimistic as it executes its strategy of building a sustainable and profitable business model for the long-term,” says Tng.
As at 1.00pm, shares in Sunningdale are trading 10 cents lower at $2.15 or 1.14 times FY17 book with a dividend yield of 3.36%.
