SINGAPORE (May 15): RHB is maintaining its “buy” on Avi-Tech with 52 cents target on possibility of an M&A and special dividend.
As at 2Q17, Avi-Tech has implemented a dividend payout policy of at least 30% of total profit. In fact, the group has a track record of paying out at least 50% of NPAT over the past few years and management said it would likely maintain this ratio going forward.
“With the positive outlook coupled with Avi-Tech’s strong cash balance, we believe that there may be a potential special dividend in FY17 to reward shareholders. This would likely boost FY17F yield to c.5.7%,” says analyst Jarick Seet in a Monday report.
Armed with a $30 million-plus war chest, management is looking at accretive acquisitions and new avenues of growth that would fit synergistically with Avi-Tech’s existing service offerings.
“We believe the group has likely learnt from past lessons and would utilise its cash more efficiently going forward. With an accretive acquisition, Avi-Tech would be able to enhance NPAT drastically, with a combination of debt and cash financing, in our view,” says Seet.
With other disruptive technologies in the Internet of things (IoT) era and the rise of cloud businesses and smart cities, Seet believes another wave of demand for semiconductor burn-in and other related services is coming for Avi-Tech.
“We believe that Avi-Tech’s long-term growth prospects are positive, in line with the digitalisation macroeconomic trends,” says Seet, “as a result, we view that a conservative and stable annual NPAT growth rate of 10% would be sustainable over the longer term.”
Shares of Avi-Tech are down 1 cent at 42 cents.
