Kumpulan Perangsang Selangor Berhad - Results In Line, Outlook Mixed
Fri, 29-Aug-2025 07:45 am
by Steven Chong • Apex Research

Counter

KPS (5843)

Target Price (RM)

0.61

Recommendation

Hold

  • KPS’s 2QFY25 CNP jumped to RM16.0m (+238.4% YoY, +137.5% QoQ), bringing 6MFY25 CNP to RM22.7m, representing 71.8%/81.6% of our/consensus estimates. We deem the results to be within expectations as we expect softer performance from CBB in the coming quarters.

  • Outlook remains mixed, with Toyoplas anchoring growth, MDS contributing gradually, and CBB continuing as a drag.

  • Re-iterate our HOLD recommendation with an unchanged target price of RM0.61, based on 10x P/E multiple applied to FY26F EPS. Our target multiple implies a 24% discount to the selected EMS peers’ average of 13.1x, reflecting KPS’s smaller market capitalisation and structurally lower profit margins.

 

Results within expectations. 6MFY25 CNP of RM22.7m was within expectations, at 71.8%/81.6% of our/consensus estimates. While earnings were strong in 1HFY25, we expect softer performance from CBB in the coming quarters, as plant closure and intensifying competition from Chinese players could lead to deeper losses, weighing on the Group’s overall results in 2HFY25.

 

YoY. Despite a 4.2% YoY decline in revenue from softer demand for water chemicals and meters, CNP surged 238.4% YoY to RM16.0m, underpinned by stronger Manufacturing contributions and lower finance costs. Manufacturing PBT rose 18.4% YoY, driven primarily by Toyoplas, which benefited from margin expansion on improved product mix and operating efficiency, while MDS registered stronger sales across the healthcare and semiconductor segments.

 

QoQ. Core net profit more than doubled (+137.5%), far outpacing revenue growth of +10.4%, on stronger Manufacturing and Trading contributions. Toyoplas was the key driver, with higher consumer electronics orders lifting utilisation and supporting margin expansion from a better product mix (PBT +43.3%; margin +2.3%-pts). Trading PBT also improved (+18.1%) on stronger water chemical sales at Aqua-Flo.

 

Outlook. We expect Toyoplas to remain KPS’s key growth driver, underpinned by resilient consumer electronics demand. MDS is progressing well with new product launches from healthcare clients, though earnings contributions will likely remain modest in the near term. In contrast, CBB’s utilisation fell to 40% in 2QFY25 (vs. 47% in 2QFY24) on intensifying competition, and we expect the paper packaging arm to incur losses in 2HFY25 as it consolidates operations and phases out sub-optimal production lines.

 

Earnings Revision. No change to our forecast.

 

Valuation. Re-iterate HOLD rating and a target price of RM0.61, based on 10x PE multiple and a three-star ESG rating. Our target multiple implies a 24% discount to the selected EMS peers’ average of 13.1x, reflecting KPS’s smaller market capitalisation and structurally lower profit margins.

 

Risks. Stiff competition from both local and international EMS operators, geopolitical and trade disruption, exposed to foreign currency exchange fluctuations.

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Market Mover
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USD 4.202015 4.235318
EUR 4.910409 4.915416
CNY 0.591633 0.592086
HKD 0.539313 0.543090
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