KUALA LUMPUR: Public Investment Bank (PublicInvest) has cut Kumpulan Perangsang Selangor's (KPS) net profit forecasts for financial years (FY) 2024 to 2026 by 8 per cent on the earnings gap from the disposal of Kaiserkorp, and weakening global consumption and electronic manufacturing outlook.
It maintained its Neutral call on the stock with a marginally higher target price of RM0.79 a share.
The firm said KPS' FY23 core net profit of RM3 million, was below its own and consensus' estimates, accounting for only 33 per cent and 34 per cent of full-year forecast respectively.
According to PublicInvest, challenges in the core manufacturing business, such as reduced orders and the loss of revenue from a major client, have further made it important to make strategic adjustments.
The adjustment comes in the wake of a significant 88.3 per cent year-on-year decline in KPS's core net profit for the fiscal year 2023, dropping to RM3.0 million from RM25.3 million in the previous fiscal year.
This decline was primarily attributed to various factors, including a slowdown across multiple business segments and the divestment of a 50 per cent stake in Kaiserkorp on Jan 10, 2024, said the research house.
Earnings from other segments as of FY23 represent approximately 17 per cent of the group's profit at pre-tax level i.e.: trading (Aqua-Flo SB) and infrastructure (KPS-HCM SB and SmartPipe Technology SB).
PublicInvest in a note today said consumer electronics demand may remain subdued in the near term as spending is restrained by multiple factors i.e.: high interest rate.
"In addition to that, we gather that the group has c. 10 per cent earnings gap post the Kaiserkorp divestment dated Jan 6, 2024.
However, KPS has been optimising its operations, coupled with diversified earnings, which may mitigate the slump from the manufacturing segment in near term," PublicInvest said.
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