(Stocks Discussion) SGX: Sunningdale Tech Ltd (SGX: BHQ)?

TL;DR: Good business model but share price of Sunningdale Tech Ltd is going down. P/E ratio of 8.2 makes the stock one worth looking at.

Business overview

Sunningdale Tech Ltd is a leading manufacturer of precision plastic components. With manufacturing facilities across Singapore, Malaysia, China, Latvia, Mexico, Indonesia, Thailand, India and Brazil, Sunningdale Tech is strategically positioned to target and capture opportunities in diverse business sectors globally using third-party logistics partners.

Share price

The share price of Sunningdale is trading at $1.29 (as of 27 May 2019). The 52-week L/H is at $1.21/ $1.67. Their share price declined further after the release of Q1 report.

Financials

Rising labour and utility costs, price pressure from customers and a slowing automotive industry as global automotive sales declined in key markets such as the US, China and Europe towards the end of 2018.

1Q2019 performance

• Revenue declines 5.6% YoY to S$159.5 million. Impacted by slowing demand within the Automotive segment amid the global slowdown in auto sales
• Q1 profit down by 59.1% on lower revenue

Revenue portfolio

Moving forward

Good

• Management expects production and utilisation at their facility in Penang to ramp up in 2H2019 as we have secured new projects with several customers.
• Within the Consumer/ IT segment, strategic decision to shift from lower-margin projects to focus on high-margin, complex precision engineering parts
• Their technological expertise gives customers the confidence to engage them for projects. Furthermore having the added advantage of having 20 manufacturing locations across 9 different countries allows them to handle projects on a global scale.

Bad

• Facing pricing pressure from customers
• Affected by shifts in global demand and fast-changing consumer sentiment
• In China, continue to face challenges due to rising labour costs as a result of recent minimum wage increases. Overall uncertainty and volatility of China’s economic climate continue to weigh on their operations.
• Rising raw material and utility costs

Conclusion

There is an increase in outlook for the next half of 2019, and performance is expected to improve. Business model is strong, but facing many challenges in the market. The share price of $1.29 makes it a pretty attractive stock you may want to consider.