Broker Name: Maybank Investment Bank Berhad
Date of Report: August 20, 2025
SAM Engineering & Equipment: Growth Resilient Amidst Forex Headwinds – In-Depth Financial Analysis and Outlook

Overview: Robust Growth with Currency Challenges for SAM Engineering & Equipment

SAM Engineering & Equipment (SAM E&E) has demonstrated resilient growth in its latest quarterly results, maintaining strong fundamentals despite currency volatility. The report from Maybank Investment Bank Berhad underscores SAM E&E’s position as a key contract manufacturer in the technology and aerospace sectors, supported by sustained demand and prudent financial management.

Quarterly Results Snapshot: Solid Demand, Margin Expansion, and Forex Impact

SAM E&E’s Q1 FY26 performance was broadly in line with expectations, delivering a 30% year-on-year (YoY) increase in core net profit to MYR13 million. While the results matched internal forecasts, they fell short of consensus estimates due to a less favourable product mix and forex headwinds from a weaker US dollar. Revenue surged 11% YoY to MYR370 million, driven by robust demand in both equipment and aerospace segments. Margin improvements were notable, with EBIT margin up 0.5 percentage points YoY to 6.6% and net margin rising to 3.5% aided by a lower effective tax rate.
However, quarter-on-quarter (QoQ) results reflected muted growth, with revenue remaining flat and a sharp 54% QoQ contraction in core net profit. This was attributed to forex translation losses, a less favourable product mix, and a higher effective tax rate due to increased losses in the Thailand plant.

Segment Analysis: Equipment Drives Growth, Aerospace Losses Narrow

The equipment segment remains the engine of growth, with revenue rising 16% YoY to MYR236.5 million. Aerospace revenue grew a modest 2% YoY, reaching MYR133.1 million. Notably, the aerospace division’s losses narrowed significantly, highlighting operational improvements. However, on a QoQ basis, equipment sales dipped by 2% while aerospace sales grew by 3%.

Key segmental notes:

• Aerospace margins improved sharply, reflecting narrower losses: Core profit before tax for aerospace was -MYR0.3m, a significant improvement from -MYR5.8m YoY.
• Equipment segment remains highly profitable, but faced a QoQ dip in margin from 12.4% to 9.7%.
• Overall core profit before tax for SAM E&E stood at MYR22.6m, up 36% YoY but down 30% QoQ.

Strategic Outlook: Long-Term Growth Drivers Remain Strong

Maybank maintains its BUY rating and target price of MYR4.63 per share, implying a 10% upside from the current price of MYR4.25. The valuation basis is 28x CY26E EPS, aligning with SAM E&E’s five-year mean. The company’s long-term prospects are underpinned by its exposure to leading global semiconductor equipment players and operational improvements in its aerospace business.

Key Risks

• Loss of key customers or market share.
• MYR appreciation impacting export competitiveness and margins.
• Weaker-than-expected customer orders or delays in semiconductor and aviation recovery.
• Production issues in core segments.
• Unfavourable trade policies or tariffs.

Share Price Performance and Market Statistics

• 12-month Price Target: MYR4.63 (+10%)
• Current Price: MYR4.25
• 52-week High/Low: MYR5.45 / MYR3.03
• Market Capitalisation: MYR2.9B / USD681M
• Free Float: 55.2%
• Major Shareholders: Temasek Holdings (Investment Co), EPF, Norges

Financial Position: Balance Sheet and Cash Flow Highlights

SAM E&E continues to maintain a healthy financial position, with notable metrics including:

• Current ratio stable at around 2.0-2.6x, indicating strong liquidity.
• Net gearing expected to rise modestly to 24-27% over the forecast period, reflecting capex investments.
• Capex intensity expected to moderate from 19% of revenue in FY24 to 4.6% by FY28.
• Free cash flow yield fluctuates, reflecting ongoing investment in capacity and growth.

Growth and Profitability Ratios: Trends and Forecasts

SAM E&E’s operational metrics reflect a solid business foundation:

• Revenue growth expects to rebound, rising from -1.1% in FY25A to 10.8% in FY26E and accelerating further.
• EBITDA and EBIT margin trends are stable, with expected margins of 15.1% and 8.9%, respectively, in FY26E.
• Dividend payout ratio steady at 20-21%, supporting shareholder returns.
• ROAE forecast to gradually increase from 6.4% in FY25A to 8.3% in FY28E.
• Cash conversion cycle remains high, with days receivable and inventory outstanding reflecting industry norms.

Historical Recommendations and Target Price Movements

Maybank has consistently maintained a BUY rating on SAM E&E, with target prices ranging from RM4.6 to RM6.8 over the past years. The company’s share price has fluctuated in tandem with market sentiment and sector performance, but the long-term trajectory remains positive.

Conclusion: SAM Engineering & Equipment – Positioned for Resilient Growth

SAM E&E’s latest quarterly results reinforce its status as a resilient growth company in Malaysia’s technology and aerospace manufacturing space. Despite FX volatility and short-term margin pressures, its strategic positioning, operational improvements, and favourable outlook with leading global customers remain intact. Investors should monitor forex trends and customer order volumes as potential risks but can expect solid long-term returns based on current fundamentals.
The consistent BUY rating and stable target price reflect Maybank Investment Bank Berhad’s confidence in SAM E&E’s ability to deliver shareholder value, supported by prudent financial management and strong industry exposure.

Contact Information

• Maybank Investment Bank Berhad, Kuala Lumpur
• Maybank Securities Pte Ltd, Singapore
• Maybank Securities (London) Ltd, UK
• MIB Securities (Hong Kong) Limited
• PT Maybank Sekuritas Indonesia
• MIB Securities India Pte Ltd
• Maybank Securities Inc, Philippines
• Maybank Securities (Thailand) PCL
• Maybank Securities Limited, Vietnam