KUALA LUMPUR: There is a more robust recovery prospect for SAM Engineering & Equipment (M) Bhd's (SAMEE) aerospace division beyond 2022, driven by the strong demand outlook for commercial aircraft production.
CGS-CIMB Research said aviation industry market research group Forecast International Inc projects total commercial aircraft production by Airbus and Boeing combined to grow by 32 per cent, 26 per cent and 11 per cent in 2022, 2023 and 2024.
Besides that, it said the International Air Transport Association (IATA) expects overall traveller numbers to reach four billion in 2024, exceeding pre-Covid-19 levels.
"Hence, we expect airlines to step up their reinvestment cycle in new capacity to capture market share, which should bode well for aircraft manufacturers, as well as suppliers (such as SAMEE)," it said in a note today.
CGS-CIMB Research projected a three-year earnings per share (EPS) compound annual growth rate (CAGR) of 24 per cent (FY22-FY25).
This will be driven by the recovery in global aviation demand, a pick-up in fan cases and nacelles production volume, higher fab spending globally, and the commercialisation of a newer product portfolio for its equipment customers.
CGS-CIMB Research also expects an additional 18 per cent production floor area expansion with the opening of its second phase expansion in the Thailand plant by 2023.
SAMEE is a 71.5 per cent-owned subsidiary of Singapore Aerospace Manufacturing (SAM) group, which is a unit of Singapore's sovereign wealth fund Temasek.
In FY22, SAMEE derived 78 per cent of its revenue from the equipment division, which serves the front-end and back-end semiconductor industry and the data storage market.
Meanwhile, the remaining 22 per cent came from the aerospace division.
SAMEE provides end-to-end manufacturing solutions for critical aircraft engine parts and aerospace-related equipment parts, like engine cases, nacelle beams and prismatic parts.
CGS-CIMB Research has initiated its coverage on SAMEE with an 'Add' rating and RM3.80 target price.