Jackspeed Corporation Ltd (J17.SI) is one of the leading manufacturers in the niche market for leather seats and car accessories customization. The company produces custom-fitted leather trim for automotive and aviation seats as well as other interior parts.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”] Jackspeed’s car seats are used in some of the top luxury car brands around the world. In 2012 the company expanded its product portfolio into trading, leasing and renting of commercial and passenger vehicles.
Jackspeed is organized into two operating segments that require different strategies. The accessories segment comprises of sales of leather trim and accessories to distributors, dealers, and manufacturers in the automotive and aviation industries. Revenues in this segment grew by 33 percent over the first half-year 2017/18 due to strong sales in Singapore and Thailand. The segment accounts now for 55 percent of the turnover. The non-accessories segment comprises sales from trading, financing, and rental of cars. Revenues in this segment decreased by 50 percent over the same period due to a low volume of vehicles traded. Non-accessories accounts for 45 percent of the revenues.
Jackspeed has manufacturing facilities in Malaysia and Thailand and serves internationally renowned clients such as Ford Asia, Naza Automotive Manufacturing, and General Motors. Singapore is still the largest geographic market of Jackspeed, accounting for 68 percent of the sales, followed by Thailand with 19 and Europe with 7 percent. Jackspeed’s top two customers make up for half of the revenues.
However, the company has just announced the closing of a deal with a European OEM car manufacturer to supply upholstery leather kits for a renowned European car manufacturer. The two-year renewable contract comprises the supply of more than 12,000 kits per annum, which is a significant increase from its current annual production of 18,000. With that deal, Jackspeed will not only have the chance to enter the European market but will also path the way for future collaborations. At the same time, the company has also won another two-year contract with a Malaysian OEM car manufacturer to supply 2,300 upholstery kits per annum. Taking advantage of the good news, Jackspeed bought back 250,000 of its shares this month.
Jackspeed was founded in 1993 and is headquartered in Singapore. The shares are listed on the mainboard of the Singapore’s stock exchange since 2003. The shares can also be traded in Germany. Major shareholder is the Singapore businessman, Mr. Cheng Kwee Kiang, with an ownership of around 44 percent. Around 31 percent of the shares are in public hand.
With a workforce of 750 employees, Jackspeed reported revenues of 29m SGD (22m USD) and profits before tax of 3.6m SGD (2.7m USD) over the first half of its financial year 2017/18. This is a decrease of 24 percent in revenues, but an increase of 37 percent in profits compared to the same period a year ago. In 2016/17, revenues and profits increased 3 percent while profits decreased by 27 percent. The operating margin of 16 percent is well above industry average. Jackspeed had cash reserves of 16.6m SGD (12.6m USD) at the end of August 2017. The company shows a healthy balance sheet with good profitability and financial strength. The equity ratio is at 52 percent and the gearing, defined here as total liabilities to total equity, at 93 percent. Next earning results will be announced at the end of April.
Jackspeed’s shares are in an uptrend since January 2015 and gained around 300 percent in value since. Despite this good performance, the company is on the watch-list of Singapore’s stock exchange due to low trading price since 2016. This could lead to a delisting from the main board in June 2020. Jackspeed is priced at ten times earnings. The shares trade slightly above book value and at five times operating cash flow only. The latest dividend yielded more than seven percent.
Jackspeed shows a healthy balance sheet with good profitability and financial strength. The new business opportunity in Europe is still not reflected in the current valuation. The industry outlook for custom fitted luxury cars is promising due to an increasing number of wealthy clients. With its technical competency, excellent craftsmanship and attention to customer needs, Jackspeed has successfully penetrated the high-barrier market for leather and fabric seat customization and is well positioned in this niche industry. Revenues and profits grew by more than 25 percent over the last three years. Assuming a stable global economy, we expect the share price to increase 20 to 30 percent until the end of this year.
AIS Rating: ★★★★☆
| 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 H1 ONly |
|
|---|---|---|---|---|---|---|
| EPS (SGPcents) | 0.24 | 0.22 | 0.92 | 2.93 | 1.74 | 0.99 |
| Change | -74% | -8% | 318% | 218% | -41% | 52% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | LIAB./ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 10 | 19 | 1.2 | 5 | 52% | 12% | 93% | 7.5% |
* Equity / Total Assets, ** Total Liabilities / Equity
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