Analysts expect better half for PIE Industrial

KUCHING: P.I.E. Industrial Bhd’s ( PIE) net profit came in largely within expectation at 40 per cent of of MIDF Amanah Investment Bank Bhd’s ( MIDF Research) full year forecast, whereby its first half net profit made up 36.5 per cent of consensus’ estimates.

The research house in a report yesterday expects PIE to register higher orders in the second half as there was a shortage of raw material supply in the market in the first half.

This comes as its revenue and profit for the second quarter gret 30 per cent and 75 per cent year on year (y- o-y) respectively.

“Annually, revenue is up by 30 per cent to RM176.07 million while profit jumped by 75 per cent to RM10.70 million. Quarter on quarter (q- o- q), topline is up by 8.8 per cent while net profit slipped by 7.6 per cent due to forex losses and higher provision for doubtful debts,” it detailled.

“Prof it before tax margin registered 7.72 per cent during the quarter due to reasonably better scale compared with last year but fell by 2.24 percentage points q- oq due to forex losses and higher provision for doubtful debts.

“Cash level declined but balance sheet is still healthy. PIE’s cash pile has dropped from RM103.9 million as of Dec 31, 2016 to RM80.7 million as of June 30, 2017. Meanwhile, borrowing is low at only RM5 million, indicating a net cash position and healthy balance sheet.

“This is partially due to an absence of a disposal in other investment which amounted to RM14.8 million.

Kenanga Investment Bank Bhd ( Kenanga Research) extended PIE’s sales momentum from 1Q17 to 2Q17, adding that financial year 2016 ( FY16) appears to be a muted one for the group given a series of unfortunate events.

“However, the group managed to turn things around swiftly with a record high 4Q16 core net profit which made up for the shortfall in 9M16. Since then, revenue had continued to show strong momentum with record 217 sales being recorded after the record 1Q17 sales.

“We believe this was due to the group’s strength as an integrated EMS player which continued to gain orders tractions from its multi- national corporation customers.”

Recall that two out of PIE’s four new projects were finally in the bag and these four projects which are for the manufacturing of industrial electronics parts, were to be awarded by its existing customers; with one being an ODM project with a renowned MNC.

“While the two projects win (with one OEM and one ODM business model) are very much anticipated which we have already accounted earlier in our earnings model considering the group’s high hit rate and advanced manufacturing capabilities, we see the ODM project as a dooropening opportunity for the group to tap into voluminous orders going forward.

“For now, we are more inclined to stick on the conservative side with our previous assumption remain unchanged. We understand that no major capex will be incurred as the existing facilities are sufficient to take up the orders.”

This led Kenanga Research to maintain outperform on PIE’s stock with an unchanged target price of RM2.87 per share.

“As our earnings drivers are still intact, we made no changes to our FY17E/FY18E earnings. The group’s superior margins, advanced manufactur ing capabilities as well as strong parentage support from Foxconn Technology Group remained as key investment merits,” it said.

Meanwile, MIDF Research maintain neutral on the stock and a target price estimate of RM2.49 per share.

PIE to register higher orders in the second half as there was a shortage of raw material supply in the market in the first half.

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