Our website is made possible by displaying online advertisements to our visitors.
Please consider supporting us by disabling your ad blocker.

Pecca 1HFY20 core net profit in line with expectations

TheEdge Tue, Feb 25, 2020 10:20am - 3 months ago

Pecca Group Bhd
(Feb 24, RM1.04)
Maintain buy with an unchanged fair value of RM1.46:
Pecca Group Bhd’s first half of financial year ended Dec 31, 2019 (1HFY20) core net profit of RM8.5 million (-7% year-on-year [y-o-y]) was in line with our expectations, accounting for 50% and 47% of our and consensus forecasts respectively.

Pecca’s automotive (car seat cover division) top line grew 7% y-o-y  for 1HFY20 to RM56 million. The original equipment manufacturing (OEM) segment registered 1HFY20 revenue of RM43.4 million (+33% y-o-y), an improvement we believe was highly attributed to the increase in production of new car models. The replacement equipment manufacturing (REM) segment recorded lower 1HFY20 revenue of RM6.7 million (-38% y-o-y) due to lower orders from Singapore as a result of the Certificate of Entitlement restrictions in the country. Meanwhile, its pre-delivery inspection segment achieved lower sales revenue of RM5.8 million (-32% y-o-y) due to a slowdown in production.

We noticed an impressive improvement in Pecca’s sales of leather cut pieces, registering a total revenue of RM7.2 million (+56% y-o-y). This was attributed to a new project secured in China. We believe that the group is supplying leather cut pieces to Suzuki.

Pecca managed to further strengthen its balance sheet with a net cash position of RM99.9 million for the second quarter of FY20 (2QFY20). Forward dividend yields of 5.2%–5.6% are attractive based on a payout projection of 60% for FY20 ending June 30 until FY22.

We continue to like Pecca because it is the sole supplier of leather car seats, a key beneficiary of Perodua’s dominance in the local automotive sector; its expansion plan to China being put in place; and the group’s potential entry into the lucrative aircraft seat segment if it manages to secure a licence to provide OEMs/REMs for the non-national aircraft. — AmInvestment Bank, Feb 24

Related Stocks

PECCA 0.835


Login to comment.