“Going forward, talks with new customers could lead to new contracts and significant production increases next year. With strong cashflow and $16.6 million net cash, Jackspeed’s 7.7% dividend yield is both attractive and sustainable,” says Nicholas Leow in an unrated report for retail investors.
In 1H17, Jackspeed’s net profit came in at $1.6 million while 2H17 net profit grew 69% to $2.7 million. Should the group sustain its earnings momentum from 1H18 into 2H18, net profit could likely range from $5-6 million for FY18. This would imply a forward FY18 PE of 9.8-11.8x and an ex-cash PE of only 7.2-8.6x.
Leow says Jackspeed is also in talks with new potential customers which could lead to significant production increases going into FY19. Jackspeed has capitalised on its technical competency, fine craftsmanship and attention to customer needs to successfully penetrate the high-barrier market for leather, polyvinyl chloride and fabric seat customisation. Today, Jackspeed’s high-quality car seats are used in some of the top luxury car brands in the world.
Jackspeed’s healthy balance sheet with a net cash position of $16.6 million, or 28% of market capitalisation, also puts it on strong footing to capitalise on new opportunities with new and existing customers.
In March 16, Jackspeed was placed on the SGX watch-list due to the Minimum Trading Price Entry Criterion.
Given the current market capitalisation of $58 million and share price of 19.5 cents, Jackspeed could potentially be granted an exit from the watch-list in the near future as investors start to take notice of the company’s strong financial performance and generous dividend yield.
The criteria to exit the watch-list are a share price VWAP of at least 20 cents and an average daily market capitalisation of $40 million of more over the last 6 months.
Shares in Jackspeed are trading at 19.5 cents.
