Broker: Maybank Investment Bank Berhad
Date of Report: August 21, 2025
SAM Engineering & Equipment: Navigating a Soft Patch with Eyes on Long-term Growth
Introduction: SAM Engineering & Equipment Faces Near-term Headwinds
SAM Engineering & Equipment (SAMEE), a leading contract manufacturer in the precision machining and equipment integration space, is entering a period of softer growth as flagged by management. While its Thailand expansion remains on track and new growth verticals are being explored, current sector challenges and customer caution are tempering earnings prospects for the upcoming years. This article provides a comprehensive analysis of SAMEE’s latest outlook, financial performance, and strategic positioning based on the latest research from Maybank Investment Bank Berhad.
Outlook Downgraded: Cautious Guidance for 2H25 and Beyond
Management is guiding for a softer second half in calendar 2025, with key customers signaling weaker sales momentum.
The aerospace segment continues to be hampered by global supply chain bottlenecks and higher operating costs at the Thailand plant.
Equipment segment growth, primarily led by a data storage customer, is expected to remain muted in the near-term.
The BB2 and BB3 plants in Thailand are set to reach full production by 1QCY26 and CY28, respectively, underpinning future capacity.
Strategic Initiatives: New Ventures Offer Promise, But Limited Near-term Impact
SAMEE has secured a foothold in the life sciences sector with a new customer.
Two front-end semiconductor customers are in the first-article production stage, aiming to diversify the revenue base.
A long-term jet programme involving prismatic components is under development.
Management cautions that these new initiatives are unlikely to have a material impact on FY26 earnings.
Financial Forecasts: Earnings Trimmed, Target Price Lowered
FY26–28 earnings forecasts have been cut by 10–12% to reflect the softer outlook.
Target Price (TP) revised down to MYR4.15 (from MYR4.63), based on a 28x price-to-earnings ratio, which is near SAMEE’s 5-year mean.
Recommendation downgraded to HOLD from BUY, citing challenging near-term conditions despite strong long-term fundamentals.
Key Investment Risks and Upside Drivers
- Risks: Loss of key customers, Malaysian Ringgit strength, and weaker-than-expected customer orders.
- Upside Potential: Faster recovery in customer loadings and earlier-than-expected mass production from new business developments.
Company Overview: SAMEE at a Glance
SAMEE is a prominent contract manufacturer, focusing on aerospace and semiconductor equipment.
Its aerospace segment specializes in precision machining of complex parts, primarily nacelles and engine cases.
The equipment division delivers engineering solutions for semiconductor and data storage industries, including precision machining, sheet metal fabrication, and automation.
SAMEE is an indirect subsidiary of Temasek Holdings, Singapore’s sovereign wealth fund.
Shareholding Structure and Market Stats
- Major shareholders include Temasek Holdings (55.2%), EPF (6.7%), and Norges (2.8%).
- Market capitalization stands at MYR2.8B (USD665M).
- 52-week high/low: MYR5.45/MYR3.03.
- Issued shares: 677 million.
- Free float: 36.9%.
Recent Share Price Performance
The stock has underperformed the Kuala Lumpur Composite Index over the past 12 months, with a 21% absolute decline and a 19% underperformance relative to the index.
Financial Highlights and Guidance
| Metric |
FY24A |
FY25A |
FY26E |
FY27E |
FY28E |
| Revenue (MYR m) |
1,497 |
1,481 |
1,510 |
1,730 |
1,950 |
| EBITDA (MYR m) |
247 |
228 |
227 |
258 |
281 |
| Core Net Profit (MYR m) |
108 |
95 |
87 |
105 |
120 |
| Core EPS (sen) |
16.0 |
14.0 |
12.9 |
15.5 |
17.7 |
| Core EPS Growth (%) |
31.3 |
(12.6) |
(7.9) |
20.1 |
14.6 |
| Net DPS (sen) |
3.3 |
2.8 |
2.7 |
3.2 |
3.7 |
| Core P/E (x) |
31.1 |
26.5 |
32.2 |
26.8 |
23.4 |
| P/BV (x) |
2.4 |
1.8 |
1.9 |
1.8 |
1.7 |
| Net Dividend Yield (%) |
0.7 |
0.8 |
0.7 |
0.8 |
0.9 |
| ROAE (%) |
9.7 |
6.4 |
6.0 |
6.8 |
7.4 |
| ROAA (%) |
5.9 |
4.6 |
4.1 |
4.5 |
4.8 |
| EV/EBITDA (x) |
14.7 |
12.0 |
13.4 |
11.9 |
10.9 |
| Net Gearing (%) |
18.2 |
15.8 |
14.8 |
17.3 |
15.7 |
Earnings Revision Summary
| FY Mar (MYR m) |
FY26E (Revised) |
FY27E (Revised) |
FY28E (Revised) |
FY26E (Old) |
FY27E (Old) |
FY28E (Old) |
% Change (FY26E) |
% Change (FY27E) |
% Change (FY28E) |
| Revenue |
1,510.1 |
1,730.1 |
1,950.1 |
1,640.1 |
1,910.1 |
2,180.1 |
-8% |
-9% |
-11% |
| EBIT |
124.6 |
151.4 |
173.6 |
145.9 |
174.9 |
205.7 |
-15% |
-13% |
-16% |
| EBIT Margins (%) |
8.3 |
8.7 |
8.9 |
8.9 |
9.2 |
9.4 |
-0.6 ppt |
-0.4 ppt |
-0.5 ppt |
| Core PATMI |
87.2 |
104.7 |
120.0 |
98.4 |
116.6 |
136.8 |
-11% |
-10% |
-12% |
Growth and Profitability Metrics
Projected 3-year revenue CAGR (2024-27E): 10%
Projected core net profit CAGR (2024-27E): 8%
Growth will be primarily driven by ongoing orders from key aerospace and equipment segment clients.
Key Financial and Operational Ratios
- EBITDA Margin is expected to remain around 14.4%-15.0% through FY28E.
- ROAE forecast to gradually recover from 6.0% in FY26E to 7.4% in FY28E.
- Net gearing remains manageable, projected to fall from 18.2% in FY24A to 15.7% by FY28E.
- Free Cash Flow Yield is expected to be positive in most years, reflecting improved cash generation as capex moderates post expansion.
Balance Sheet Strength
Cash and short-term investments are forecasted to rise significantly from MYR28 million in FY25A to MYR240 million by FY28E.
Inventory and receivables levels are expected to grow in tandem with revenue expansion and capacity ramp-up.
Total shareholders’ equity is projected to increase steadily, reinforcing SAMEE’s financial resilience.
Cash Flow Projections
Significant capex outlay in FY24A (MYR287.7m) will taper off after FY27E, with a return to positive free cash flow by FY28E.
Dividends are expected to remain modest, with a payout ratio near 21% of net profit over the forecast period.
Operational Strengths and Strategic Positioning
- Strong niche expertise in complex aerospace component machining and integrated equipment solutions for semiconductors and data storage.
- Thailand expansion positions SAMEE to benefit from lower-cost operations and strategic proximity to key markets.
- Exposure to leading front-end semiconductor equipment players will drive long-term growth, despite short-term volatility.
Swing Factors and Sensitivities
Upside:
- Faster-than-expected recovery in global semiconductor demand.
- Margin expansion from full ramp-up of new Thailand facilities.
- Securing new front-end semiconductor clients.
Downside:
- Prolonged downturn in the semiconductor cycle.
- Global disruptions impacting aerospace demand or operations.
- Loss of key customer accounts.
Historical Recommendations and Target Price Evolution
The stock was rated BUY throughout 2023 and early 2025 with target prices ranging from RM5.5 to RM6.8.
As of August 21, 2025, the recommendation is downgraded to HOLD with a revised target price of RM4.15.
Conclusion: Long-term Strength, Near-term Caution
SAM Engineering & Equipment stands as a well-positioned contract manufacturer with a robust footprint in aerospace and semiconductor equipment. Despite near-term softness due to sectoral headwinds and customer caution, its ongoing capacity expansion and forays into new industries set the stage for renewed growth in the medium to long term. Investors are advised to adopt a cautious stance in the near-term while keeping an eye on potential catalysts that could accelerate SAMEE’s recovery and unlock further value.
