• Maintain BUY (TP: RM0.52). Dancomech (Danco) experienced a slight YoY decline of -0.1% in FY23 top-line, reaching RM211.8mn, aligning with our expectations and accounting for 93% of our full-year forecast. The group's core PATAMI amounted to RM20.9mn (+15.8% YoY), meeting both our projections and consensus expectations, representing 106% and 91.6%, respectively. This achievement was primarily attributed to a higher gross profit margin in the Trading Business segment. In 4QFY23, Danco's revenue decreased by -15.3% YoY to RM51.6mn, mainly due to reduced revenue from the Metal Stamping business resulting from decreased demand in the airconditioning industry. Nonetheless, this decline was offset by increased revenue from the Trading Business, reflecting the recovery of both local and overseas markets following the Covid-19 pandemic. Maintain a BUY call on Dancomech with TP of RM0.52, pegged at 10.5x PER to the FY24 EPS of 5sen.

• Key highlights. In 4QFY23, there was a notable decline in revenue, with a decrease of -6.4%, and a 17.1% increase in core PATAMI on a QoQ basis. While the Trading, MHS Solution, and E&E Engineering businesses recorded lower revenue, this was offset by higher revenue from the Metal Stamping and Pump Manufacturing Business. Nevertheless, the increase in core PATAMI can be attributed to a higher gross profit margin.

• Earnings Revision. No change to our forecast.

• Outlook. The group has demonstrated remarkable resilience, achieving a 15.8% growth in Core PATAMI despite grappling with uncertainties and challenges in both domestic and overseas markets, stemming from prevailing global economic and political headwinds. Despite this, the group remains committed to intensifying sales efforts while actively mitigating market uncertainties and challenges. Additionally, the company will persist in identifying and assessing potential acquisition and collaboration opportunities to enhance its financial performance.

Source: BIMB Securities Research - 27 Feb 2024