SINGAPORE (Aug 4): DBS Vickers is maintaining its “buy” recommendation on Sunningdale Tech given 2Q17 earnings more than doubled y-o-y.
See: Sunningdale 2Q earnings more than double to $8.2 mil
This came on the back of an “impressive” 6.5% increase in sales.
DBS says 2Q17 earnings were negatively skewed by one-off restructuring costs of $4.8 million, which was partly offset by forex gain of $1.5.
In a Thursday report, analyst Lee Keng Ling, says, “Stripping out the impact of forex and one-offs, we estimate that net profit would have been closer to $7 million/$9.8 million/$10.9 million in 2Q16/1Q17/2Q17, respectively.”
The group’s Consumer/IT segment performed the best, reporting 7.8% growth and contributing about 40% of 2Q17 sales.
Although the Automotive segment saw a slight dip after showing 10 straight quarters of growth, it continues to be contribute a substantial 37% to the group’s sales.
The positive results were also due to productivity gains, as the streamlining of operations and ongoing efficiency initiatives have yielded some positive results.
The group’s plant in Penang, Malaysia is currently under construction and is scheduled to be completed by end-1Q18.
Meanwhile, the group will also be adding capacity to its latest Chuzhou, China manufacturing plant in anticipation of more Automotive and Consumer/IT projects in the future.
“As Sunningdale continues to execute on the above, it should incur higher capex of around $35 million for FY17F, compared to the historical average of $25 million p.a,” says Ling.
The analyst predicts that the group’s earnings momentum will strengthen as it heads into the seasonally stronger second half, especially in the Consumer/IT segment, where demand tends to be strongest leading up to the year-end gifting season.
Shares in Sunningdale are trading 1 cent lower at $2.14 as of 10.41am.
