• Maintain BUY (TP: RM0.52). Dancomech (Danco) 9MFY23 top-line rose by +6% YoY to RM160.1mn, in-line with our expectations, accounting for 70% of our full year forecast. The group’s core PATAMI of RM15.1mn (+29.6% YoY) also met our and consensus expectations, accounting for 77% and 70.2%, respectively mainly due to a higher gross profit margin. In 3QFY23 Danco’s revenue reached RM55.2mn, slightly decline by -2.2% YoY, mainly due to the lower revenue contribution from Metal Stamping business arising from lower demand from its customers in the air-conditioning industry. However, this was offset by the higher revenue recorded by Trading Business with the recovery of the local and overseas markets post the Covid-19 pandemic. Maintain a BUY call on Dancomech with a revised TP of RM0.52 (pegged at 10.5x PER to FY24 EPS of 5sen) vs. RM0.42 previously, as we rolled forward our valuation to FY24.

• Key highlights. In 3QFY23, there was a notable uptick in revenue, with a slight increase of +0.6%, and a 14% increase in core PATAMI based on a QoQ basis. Although the Trading and Metal Stamping Business recorded higher revenue, this was counterbalanced by lower revenue from the E&E Engineering and MHS Solution Business. Nevertheless, the increase in core PATAMI can be attributed to a higher gross profit margin and reduced operating expenses.

• Earnings Revision. No changes to our forecast.

• Outlook. The market is anticipated to pose ongoing challenges in the final quarter. Nevertheless, the company remains committed to driving sales and proactively addressing market uncertainties and obstacles. Furthermore, the company will persist in seeking and evaluating potential acquisition and collaboration opportunities to bolster its financial performance.

Source: BIMB Securities Research - 30 Nov 2023