PETALING JAYA: Sam Engineering and Equipment
(M) Bhd’s near- to medium-term outlook appears clouded, with softening demand and escalating costs putting pressure on its key businesses.
CGS International (CGSI) Research reiterated its “reduce” rating on SAM, despite upside risks of faster-than-expected recovery of global aircraft and wafer fab equipment (WFE) demand.
SAM’s outlook remains muted, dampened by weakening demand from the equipment division and rising operating costs from the aerospace segment, it said.
In addition, CGSI Research has lowered its target price (TP) for the group to RM2.60 from RM2.89, based on the Gordon Growth Model (GGM)-derived TP.
In 1Q26, SAM Engineering recorded a net profit of RM16.2mil, up 60.3% from RM10.1mil a year earlier. Earnings per share rose to 2.39 sen from 1.49 sen previously.
Quarterly revenue rose 10.8% to RM369.6mil compared with RM333.4mil a year prior.
“We believe the risk-reward is geared towards the downside, the research house said in a note to clients.
“As such, we cut our financial year of 2026/2027 (FY26/27) earnings per share by 15.1% to 24.8%”.
CGSI Research added that the group’s aerospace segment can expect industry momentum in FY26 to be weighed down by material shortages, underpinned by the sector’s intricate supply chains and heavy reliance on suppliers.
“Demand pushout is inevitable in the coming quarters as upstream suppliers are still grappling to meet contractual obligation deadlines on tariff-induced material shortages,” the research house said.
SAM’s aerospace segment is expected to remain burdened by startup costs at its new Chonburi sites in Thailand, while the ongoing relocation from its higher-cost Singapore manufacturing base is set to continue until FY27.
CGSI Research noted that the group’s equipment segment, which accounted for 64% of group revenue for 1QFY26 ending in March, will be impacted as key customers cut volume loading guidance by around 10% to 15% for the second half of 2025.
“Both of its key US-based front-end customers flagged ongoing concerns over softness in the Chinese market in the upcoming quarters,” it added.
This reflects expectations of a weaker industry outlook as integrated circuit inventories reach their peak and lethargic global wafer fab utilisation.
Although demand from SAM’s data storage customers has been lifted by data centre-related products, margins from this account remain thinner compared to its two other major US-based customers.
CGSI Research pointed out that the group’s de-rating catalysts are prolonged weak aircraft deliveries and sharper pullback in WFE spending.
