• Revised our call from BUY to HOLD and maintaining (TP: RM0.52). Dancomech (Danco) experienced a slight YoY decline of -1.9% in 1QFY24 top-line, reaching RM49.1mn, aligning with our expectations and accounting for 20% of our full-year forecast. This was due to lower revenue recorded by Metal Stamping business as a result of lower demand from its customers in the air-conditioning industry. Nevertheless, the company's core PATAMI reached RM4.5mn, indicating a 4.7% YoY rise, in line with both our forecasts and consensus expectations, representing 20% and 18.9%, respectively. This uptick was somewhat mitigated by the increase in other income, such as calibration and fabrication charges, the reversal of provision for expected credit losses, and interest income. We have revised our recommendation from BUY to HOLD, maintaining our TP at RM0.52 as the share price has reached our TP due to recent rally.

• Key highlights. In 1QFY24, there was a notable decline in revenue, with a decrease of -5.0%, and a -21.7% decrease in core PATAMI on a QoQ basis. This is primarily due to decreased customer demand, which led to a lower revenue contribution from the trading business.

• Earnings Revision. No change to our forecast.

• Outlook. The company remains committed to intensifying its sales initiatives while proactively managing potential challenges arising from lower-than-projected external demand, heightened geopolitical tensions, and significant domestic commodity production declines. Additionally, the Group will persist in its strategic pursuit of identifying and evaluating opportunities for acquisitions and collaborations aimed at boosting profitability.

Source: BIMB Securities Research - 31 May 2024