PETALING JAYA: Supercomnet Technologies Bhd (STB) is expected to see bright prospects ahead, owing to healthy order flows across its medical, automotive and industrial manufacturing segments.
TA Research said the cable and medical devices manufacturer’s wholly-owned subsidiary, Supercomal Medical Products Sdn Bhd (SMP), remains STB’s largest earnings contributor.
In the financial year 2021 (FY21), SMP accounted for 67% of the group’s revenue.
“SMP will have order visibility until the first half of 2023 (1H23).
“The medical segment would provide the group with good earnings visibility as customers normally place orders at least six months ahead,” said the research house in a report yesterday.
TA Research said orders from SMP’s existing clients, Ambu and Edwards Lifesciences, will continue to increase.
“Historically, we note that Ambu and Edwards Lifesciences’ orders grew by at least 10% every year and we expect this trend to continue in FY22 to FY24,” it said.
SMP’s other notable clients include Mermaid Medical and Plass Rescue Technologies.
“According to management, new customer IHS will be STB’s largest revenue contributor in FY23, surpassing Ambu that made up 33% of revenue in FY21.
“Meanwhile, management expects Mermaid Medical to become STB’s second-largest revenue contributor in FY23,” said TA Research.
The company is also the sole supplier of the medical devices that it manufactures for its customers.
Moreover, new products like the IHS syringe infusion system and Mermaid declotting devices are in the pipeline and will be available in 2H22.
Additionally, delivery for Ambu’s Falcon-C product will commence in the fourth quarter of 2022 (4Q22) while the US Food and Drug Administration approval is still pending for Plass’ soldier first aid hemostatic product.
Going forward, the research house said the group will move towards the manufacturing of whole medical devices instead of components to improve margins.
On the automotive segment, the group’s wholly-owned subsidiary, Supercomal Advanced Cables (SAC) is expected to see significant orders from its main customer, Stellantis.
In the Asia-Pacific region, SAC has been identified as the sole supplier of wire harness and fuel tanks for Peugeot.
“SAC has signed an agreement with Stellantis to supply wire harnesses and fuel tanks for the Peugeot 5008, 3008 and 2008 models.
“We also gather that SAC had submitted samples of fuel tanks in 2Q22 and wire harness machines in 3Q22 to France and Shanghai for testing.
“With that, mass production of fuel tanks and wire harness machines are expected to begin in 4Q22,” said TA Research.
Overall, STB’s automotive arm is projected to post RM17.6mil and RM28.5mil in revenue for FY22 and FY23, respectively.
For the industrial segment, STB’s customer Aptiv has resumed its orders of raw wires and wire harness from the group, despite higher selling prices.
“Aptiv faced difficulty in finding a second source in Malaysia as a whole set of testing would take about one year to complete and will cost around RM500,000.
“As such, Aptiv has re-ordered its supplies from STB even after the group adjusted its selling price upwards,” said TA Research.
STB is also expanding its capacity with a five-storey building expansion that is expected to be completed in three years.
TA Research has a “buy” call on STB with a target price of RM2, based on a target price-to-earnings ratio of 32 times.