Team from Sunningdale Tech at the Singapore Corporate Awards event this week where CEO Khoo Boo Hor won the"Best CEO" title in the small-cap companies category. Photo by Tok Chong Yap
CEO Khoo Boo Hor is second from the left. Photo by Tok Chong Yap
Excerpts from Maybank Kim Eng's report
Analysts: Neel Sinha & Lai Gene Lih
Industry leading capabilities with a global footprint
SUNN is one of the leading precision plastics engineering companies in Asia. It has an extensive manufacturing presence worldwide (currently in 19 sites across nine countries in Asia, Europe, N. America, S. America and a new plant in Malaysia in the pipeline) serving a long roster of clients, many of them prominent MNCs in their respective sectors. Management has a cautiously optimistic growth outlook despite the pricing and cost pressures faced by the industry.
| Stock price | S$2.00 |
| 52-week range | 90.5c - S$2.21 |
| Market cap | S$284 m |
| PE | 8.9 x |
| Dividend yield | 2.9% |
| Year-to-date return | 82% |
| Source: Bloomberg | |
Strong core competencies; diversified exposure
SUNN’s customer exposure is quite diversified as the top 30 customers account for 80% of revenue (and top 10 make up 50%). Management believes its key competitive advantages are:
1) it’s one of the few firms with manufacturing presence outside Asia;
2) precision engineering capabilities built over three decades;
3) a very diversified product offering that mitigates demand volatility in a specific product; and
4) tooling expertise that is instrumental in driving levels of automation.
FY17 growth driven by automotive
Amongst SUNN’s four business segments, management expects automotive (39% of 1Q17 revenue) to be the key growth driver for FY17. New projects have lifted the consumer/IT segment (38% of revenue) from its 1Q16 bottom, and the segment is expected to deliver modest revenue gains for the rest of the year.
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Valuation: Trading below its peers |
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“Based on FY17 consensus EPS forecast of SGD0.183 (three estimates), SUNN is trading at 10.4x forward P/E, compared to its Singapore peer basket of 14.4x.” |
Healthcare is currently small (8% of revenue) and SUNN aims to increase its customer base and product offerings in this segment.
Mould fabrication (14% of revenue) has been performing poorly for the past few quarters due to structural trends and weakness from one customer. SUNN is undertaking various initiatives, like trimming excess capacity and increasing automation to boost gross margins (11.6% in FY13 to 13.8% in FY16; 1Q17 15%). Medium-term growth plans may include M&A with management comfortable with ticket sizes of cSGD200m.
