KUALA LUMPUR: AmInvestment Bank Bhd Research (AmBank Research) has maintained its “underweight” call on PECCA GROUP BHD with a lower fair value of RM0.55 per share from RM0.63 previously, after the group’s export business declined with weaker revenue contribution from Europe, which slid -31% year on year (y-o-y) and North America, which slowed down -25% y-o-y.
However, in a note yesterday, the research house said these were partially mitigated by higher sales contributions from Singapore and Africa, where the group posted stronger revenues of RM10.7mil (+5% y-o-y) and RM1.6mil (+14% y-o-y), respectively.
It said Pecca’s exports operations contributed to 17.4% of its total top line in nine-month of its financial year 2020 (9MFY20).
“We cut our financial year 2020-2022 (FY20-22F) net profit forecasts by 46%, 23% and 10%, respectively, ” said the research house.
It said the earnings downgrade is to reflect lower sales volume assumptions due to: the prolonged movement control order (MCO); and weaker market demand as consumer appetite for big-ticket items is unlikely to fully recover to the pre-Covid-19 levels in the near term, this in turn affects vehicle productions and demand for Pecca’s leather seat products.
“Pecca’s 9MFY20 core net profit of RM8.7mil (-37% y-o-y) was below with our expectations, accounting for 58% and 55% of our and consensus forecasts, respectively, ” it said.
In addition, Pecca’s automotive (car seat cover division) top line dropped 6% y-o-y in 9MFY20 to RM89.0mil.
“The OEM segment registered a 9MFY20 revenue of RM59.1mil (+8.0% y-o-y, an improvement that we believe was highly attributed to the increase in production for new car models in first half of its financial year 2020 (1HFY20), ” it said.
The REM segment recorded a lower 9MFY20 revenue of RM9.5mil (-42% y-o-y) due to lower orders from Singapore as a result of the Certificate of Entitlement restrictions in the country.
Meanwhile, PDI achieved a lower sales revenue of RM8.1mil (-32% y-o-y) due to a slowdown in production. “We also notice a substantial slide in Pecca’s sales of leather cut pieces in the latest quarter, registering a total revenue of only RM1.3mil (-63% quarter- on-quarter (q-o-q), -33% y-o-y in third quarter of its financial year 2020 (3QFY20). This was attributed to lower orders from China with Covid-19 extending the Lunar New Year holidays, ” it added.— Bernama
Nevertheless, Pecca‘s balance sheet remains healthy, sitting on a net cash position of RM91.0 million or 50 sen per share in 3QFY20.
Forward dividend yields of 3.6-5.7% are decent based on a payout projection of 40% for financial years 2020-2022. The group declared a dividend of 3.0 sen for the quarter, ” said the research house. -- BERNAMA
Did you find this article insightful?