SCOMNET (001)

Company : Supercomnet Technologies Berhad

 Business :

Manufacturing of cable and wire for medical devices, automotive and electrical appliances. They are OEM for leading companies like Edward Lifescience and Denmark Ambu. The real gem in the company is Supercomal Medical Products, SMP that manufactures cable for medical devices. Their products have gained European CE marking and US FDA certification. These certifications are extremely important for selling to Europe and North America market. It is another company with Taiwanese board of directors.

Fundamental :

Company has net cash of RM18 million (no bank borrowing). Still small but given time, I think it will grow if they manage it well. 5 years revenue and profit before tax as follow. You can see both revenue and profit are growing after acquisition of Supercomal Medical Products, SMP in 2018.

 

Main contribution coming from medical device division. E&E division may recover gradually on strong demand for semiconductor.

 

Geographical breakdown of the revenue is as follow. Domestic market (Malaysia) is contributing more than 50% of their total revenue.

 

SCOMNET - Q1 Result

 

 Profit has dropped in Q1 largely because of copper as raw material price. See note below.

 

 Prospect:

Small company with potential of growth especially on their medical segment. They will kick start production for new product which will contribute to the revenue stream. They are looking at double digit growth in FY2021 (See note below)

 

 

Company is on expansion mode to cope with demand.

 

I think the market demand for their product is good but the risk is raw material price of copper. If we take a look on the copper price chart below, I think their profit margin will drop again in Q2.

 

My view on share price:

It is a definitely a high-risk high-reward for this company. Price already surged from around RM0.80 to peak price of RM2.38 (mid Nov 2020) then come down to RM1.55 and surge again to RM2.05 (around end Apr). Please don’t buy if you don’t have a strong heart for roller coaster excitement!

 

In terms of earning, I think will be flat mainly due to high copper raw material price. Quick estimation of the full EPS below. At current price of RM1.64, PE will be 54 . I think it is high and overvalued. 

Q1	Q2	Q3	Q4	Total
0.71	0.70	0.80	0.80	3.01

There is good coverage from fund managers so every now and then you will see reports from fund managers. It may be good for short term trader with high risk appetite due to its volatility (goreng?).

At time of writing, I don’t own any Scomnet shares. Buy at your own risk.