Kumpulan Perangsang Selangor Berhad - Weak quarter; cut forecasts but maintain HOLD
Thu, 28-May-2026 07:19 am
by Research Team • Apex Research

Counter

KPS (5843)

Target Price (RM)

0.52

Recommendation

Hold

  • KPS recorded 1QFY26 core net profit of RM2.0m (-70% YoY), coming in below expectations at 6% of our FY26F forecast and 5% of consensus, dragged by weaker manufacturing contributions as customers adopted a wait-and-see approach amid geopolitical uncertainties.

  • Near-term outlook remains cautious as Toyoplas, CPI and MDS face uneven demand amid shifting customer portfolios, while CBB continues to grapple with intense competition in low-margin packaging. Aqua-Flo should remain steady, supported by domestic water operator contracts.

  • We cut FY26/27F core net profit by 35%/20% to RM22.6m/RM28.1m and introduce FY28F of RM31.3m. Maintain HOLD with a lower TP of RM0.52 (from RM0.65) based on 10x FY27F earnings.

Below expectations. KPS recorded 1QFY26 core net profit of RM2.0m (-70% YoY, nm QoQ from -RM3.7m in 4QFY25), coming in well below our expectation at only 5.7% of our FY26F forecast of RM34.8m and 5.4% of consensus. 1QFY26 core net profit was arrived after excluding gain on fair value of short-term funds (-RM0.7m) and net forex gain/loss (-RM0.7m gain, +RM1.7m loss, netting to +RM1.0m) from reported PATAMI of RM2.4m.

 

QoQ. Revenue declined 20.6% from 4QFY25 due to lower contributions from both manufacturing (-18.9%) and trading (-27.3%) segments, as customers moderated their ordering patterns following the inventory build-up in prior quarters. However, core PATAMI turned positive at RM2.0m (4QFY25: -RM3.7m) mainly due to a better product mix and a lower effective tax rate of 60.1% (4QFY25: 67.0%). EBITDA margin improved to -2.2% (4QFY25: -4.2%), though remained negative.

 

YoY. Core earnings plunged 70% YoY, primarily due to (i) a 15.7% decline in manufacturing revenue as Toyoplas, CPI and MDS experienced a pullback in orders amid softer global consumer electronics demand as customers adopted a wait-and-see approach amid ongoing geopolitical uncertainties, (ii) 7.3% decline in trading revenue from lower water chemical sales at Aqua-Flo owing to the dry season, and (iii) share of JV results swinging to a loss of RM0.4m (1QFY25: +RM0.8m). CBB continued to face headwinds from intense competition and pricing pressure from low-cost Chinese exports.

 

Outlook. We remain cautious on KPS’s near-term outlook amid persistent macro headwinds. Toyoplas, CPI and MDS are expected to face uneven revenue as customers adjust portfolios amid shifting demand dynamics. CBB faces continued pressure from intense competition in low-margin packaging. Aqua-Flo should deliver steady performance supported by domestic water operator contracts.

 

Earnings Revision. We cut our FY26/27F core net profit forecasts by 35%/20% to RM22.6m/RM28.1m respectively, to reflect the weaker-than-expected manufacturing contribution amid soft consumer sentiment and global uncertainties from geopolitical tensions. We also introduce our FY28F core net profit forecast of RM31.3m.

 

Valuation. We maintain our HOLD rating but with a lower TP of RM0.52 (from RM0.65), based on 10x FY27F core EPS of 5.2 sen and a three-star ESG rating. Our target PE of 10x is warranted given the weak near-term earnings trajectory and limited near-term catalysts. At the current price of RM0.57, the stock trades at 10.9x FY27F PE, leaving limited downside but insufficient upside to justify a more constructive stance given the subdued earnings outlook.

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