KUALA LUMPUR: Hong Leong Investment Bank (HLIB) is optimistic about SAM Engineering & Equipment Bhd's future because of its involvement in the semiconductor and ultra-fast-growing aerospace industries.
HLIB views these industries as long-term complementary.
"SAM Engineering is a highly rare secular growth stock. We are positive on the stock due to the global semiconductor industry gradually recovering from the inventory correction cycle. Aerospace is turning around strongly as global air passenger travel has recovered to more than 99 per cent of pre-pandemic levels.
"While the group's Thailand expansion will take time before breaking-even, we are encouraged by the narrowing losses in each subsequent quarter," it said in a note.
SAM Engineering reported third quarter (Q3) financial year (Q3FY24) core earnings of RM27 million, which lifted its nine-month sum to RM74 million (11 per cent growth year-on-year), accounting for 80 per cent of the bank's and consensus full-year estimates, respectively.
"This is deemed in line as Q4 FY24 is a seasonally weaker quarter, especially for the semiconductor industry," it said.
HLIB maintained a buy on the company with a higher target price of RM4.92 (formerly RM4.76) as it factors in the impressive recovery from its aerospace segment over the past two quarters.
"While the group's Thailand expansion will take time before breaking even, we are encouraged by the narrowing losses in each subsequent quarter," it said.