SFP Tech to ride high on semiconductor resurgence

SFP Tech Holdings Bhd has been a disappointment for many investors. This is especially for those who bought the shares at its 52-week of RM1.05 last December. The counter hit a trough of 59.5 sen on 10 Sept, its lowest level since Dec 2022 before recovering to close at 66 sen on Sept 13.

SFP, which is an integrated one-stop automation equipment solutions and engineering supporting services provider, is expected to post a record year. This is following its latest quarterly results in August, boosting its share price to 75.5 sen, its highest since July 23, 2024.

SFP Tech net profit for the second quarter grew 21.2%, contributed mainly by its engineering supporting services (ESS) segment which recorded increased orders. Net profit for the three months ended June 30, 2024 came in at RM12.9 million, versus RM10.6 million a year earlier.

Revenue increased 24.6% to RM45.39 million from RM36.44 million. This marks SFP Tech's highest quarterly net profit and revenue since its listing on the ACE Market in June 2022.

In the 6 months just ended, SFP Tech’s net profit rose 6% to RM22 million from RM20.7 million a year ago. This was on the back of a 11.3% increase in revenue to RM79.1 million from RM71 million a year earlier.

According to consensus expectations, the company is projected to show higher net earnings of RM43.2 million in FY24 and RM56.9 million in FY25, which translate to prospective price earnings (PE) ratio of 35.3x and 26.8x, respectively.

SFP Tech plans to submit its application to the authorities in by 2H2024 for the transfer of listing from the ACE Market to the Main Market. The company is currently trading at a PE ratio of 37.8x, which is lower than most peers. Its price over net asset value ratio stood at 7.1x - is the highest among peers.

Nevertheless, despite the high PE, analysts are positive on the company as it is on track to register back-to-back record high profits annually until 2026. This will be driven by the newly acquired ST Exhibit Automation Sdn Bhd, completion of a new manufacturing plant, and new equipment to boost earnings, said Hong Leong Investment Bank.

Hong Leong Investment Bank upgraded the stock to ‘buy’ from ‘neutral’ with an unchanged target price of 81 sen. The research house is also forecasting a core net profit of RM41.2 million, or 1.7 sen per share, for this year.

Optimism is high for SFP, which is likely to benefit from the government’s National Semiconductor Strategy will help Malaysia move up the value chain in the global semiconductor industry.