Muted near-term earnings likely for SAM Engineering

PETALING JAYA: Analysts have downgraded SAM Engineering and Equipment (M) Bhd and cut their earnings forecasts after the group reported a weaker set of results for its second quarter ended Sept 30, 2025 (2Q26).

Hong Leong Investment Bank (HLIB) Research noted that SAM Engineering’s 2Q26 core profit after tax fell 44% year-on-year to RM13mil, bringing first-half core earnings to RM27mil – just 30% and 31% of its and consensus full-year estimates.

It highlighted that SAM Engineering had earlier cautioned of a softer second half of calendar year 2025, driven by weaker near-term demand from front-end equipment customers – estimated to be 10% to 15% lower – and persistent supply chain constraints in its aerospace division.

“Despite prior guidance for softer quarters, 2Q26 earnings missed expectations, mainly due to weaker-than-expected sales volume and further margin compression from a weaker US dollar,” it said.

On the equipment segment, HLIB Research said SAM Engineering’s key front-end customer is signalling a weaker first half of the year as China’s wafer fab equipment spending slows under tighter US export controls.

However, it said the customer “struck a more upbeat tone on second half, pointing to a potential rebound in global wafer fab equipment activity as memory capital expenditure tied to artificial intelligence demand begins to pick up meaningfully.”

On its aerospace segment, HLIB Research said SAM Engineering continued to face elevated costs due to its expansion in Thailand.

According to HLIB Research, Ban Bueng plant two (BB2) is undergoing machine transfer and qualification through 4Q of last year with full production targeted in first quarter of next year.

It said BB3, still under construction and due for completion by end-2025, would only reach full production by 2028.

“Both plants are part of a long-term initiative to shift aerospace operations from Singapore to Thailand, driving cost savings and supporting new business opportunities,” it added.

To reflect lower sales volume and margin assumptions, HLIB Research has cut its financial year ending March 31, 2026 (FY26) to FY28 earnings forecasts by 29%, 13% and 6%,respectively.

It said SAM Engineering’s near-term earnings were likely to remain muted due to flattish front-end equipment demand, transitional costs in the aerospace segment, and margin pressure from a weaker US dollar.