Sunright

Sunright: (S$0.28) Resilient business; net cash >40% of market cap
- Posted improved FY16 pretax profit of $9m (+18.6%), but net profit declined (-55.9%), due to higher profit share of minority interests.
- Revenue slipped 5.6% on lower distribution sales and a weaker MYR against SGD, but operating costs reduced at a faster pace.
- Balance sheet health is strong with net cash of $49.5m ($0.403/share), underpinned by a stable operating cash flow of $27m (FY15: $27.5m).
- Despite its large cash pile, management maintained its first and final DPS of 0.2¢, but did not pay out a special DPS this year (FY15: 0.2¢), which may be a signal of potential M&A in the pipeline.
- At $0.28, we believe Sunright is attractively valued at a 31% discount to its net cash and see a trading opportunity for the stock.