SINGAPORE (Aug 21): RHB Research is maintaining its “buy” call on Avi-Tech Electronics with a higher target price of 59 cents from 52 cents previously on expectations of positive long-term growth.
This comes after the group last reported a strong 4Q17 and declared a special dividend of 0.8 cent, bringing its total FY17 dividend to 2.8 cents which represents a yield of around 6%.
In a Monday report, analyst Jarick Seet opines that Avi-Tech’s burn-in services segment is well-positioned to benefit from the rising sophistication of vehicles, and ultimately, the advent of driverless vehicles in the long-term.
As such, RHB projects for Avi-Tech’s growth to maintain at a stable rate of around 10-15% per annum over the course of FY18F.
“With other disruptive technologies in the Internet of Things (IoT) era and march towards cloud businesses and smart cities, we believe another wave of demand for semiconductor burn-in and other related services is coming. This ought to be a further boost to the group,” says Seet.
The analyst is also positive on the group’s long-term prospects based on its strong balance sheet and positive cash flow generation, as he thinks there is a high possibility it may acquire an accretive target in the near-term.
This would serve as a positive re-rating catalyst and at the same time, enhance the group’s net profit after tax (NPAT) drastically, in Seet’s view.
“With a >$30 million war chest at its disposal, management is looking at accretive acquisitions and new avenues of growth that would fit synergistically with the company’s existing service offerings. We believe it has likely learnt from past lessons and would utilise its cash more efficiently going forward,” he adds.
Shares in Avi-Tech are trading flat at 47 cents as at 11:09am.
