Supercomnet Technologies Bhd

(SCOMNET, 0001)

Supercomnet Technologies Bhd (Fundamental BUY with TP 2.68)

• We continue to favour Supercomnet Technologies Bhd (“Scomnet”) for its resilient earnings outlook and
as a proxy to the recession proof healthcare industry. We are raising our earnings estimates by 19.5% for
FY21 on the back of rising orders from major clients.
• BUY with a revised target price of RM2.68 premised on a 3-year average mean of 34x PER which is at a
discount to Bursa Malaysia Healthcare Index of 43x further supported by a 68% surge in EPS in FY21.
• Scomnet’s recent 2Q20 results were pretty much in-line with our expectations where it reported net
profit of RM5.95m (+45% from previous quarter and +12% from last year) with cumulative RM10m for
1H20.Net margins improved to 24.6% in 2Q20 and cumulative 1H20 to 19% from around 16.0% in FY19. We
believe it is on track to surpass our RM30m forecast in FY20 with the medical cable segment being the
key driver with resilient outlook and impressive pipeline of products to sustain its earnings going forward.
Furthermore, their automotive segment is seeing a recovery post MCO and has landed a new major client
in French PSA Group
• Scomnet is embarking on a multi-year expansion with initial capex of RM7-10m and eventually is
expected to double production capacity catering for their supercharged growth in the medical products
supplying their FDA and EMA approved medical cables to their long serving major key clients namely US
based Edward Lifesciences and Denmark based Ambu and Mermaid Medical. These companies are
major global cardiovascular medical devices companies anchoring Scomnet growth trajectory as
cardiovascular diseases are the number no. 1 cause of death globally according to WHO
• Balance sheet remains healthy with cash pile growing to RM56.6m and zero borrowings. We expect
Scomnet to deliver its strongest ever performance on record with supercharged growth in EPS for +59%
in FY20 and +68.3% in FY21.
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