SINGAPORE (Jan 10): CIMB Research says the rise of autonomous vehicles and Internet of Things (IoT) will provide Avi-Tech Electronics with potential new earnings growth drivers.
A provider for burn-in and engineering services for the semiconductor, electronics and life sciences industries, Avi-Tech has seen an increase in demand for new and different types of burn-in boards on the back of a ramp-up in production of automotive and networking semiconductor chips.
“Management has noted that in the march towards fully driverless vehicles, there is likely to be an ever-increasing number of sensors, microcontrollers and power management components required,” says CIMB analyst William Tng in an unrated report on Tuesday.
“Another potentially-significant semiconductor driver highlighted by management is cloud computing, big data and smart cities that are driving up demand for servers and data centres exponentially,” he adds.
For Avi-Tech, these point the way toward increased opportunities for board manufacturing and burn-in services as newer and more powerful microprocessors come on board.
In the 1Q18 ended September, Avi-Tech saw its earnings grow 16.6% to $1.7 million on the back of higher revenue.
Revenue rose 31.3% to $11.1 million in the quarter, from $8.5 million a year ago, led by higher contribution from its Manufacturing and PCBA Services business segment.
In addition, Tng notes that Avi-Tech’s historical price-to-earnings valuation is on par with its industry peers in the region.
“[Avi-Tech] trades at a historical FY17 P/E of 11.9x versus its regional peer group average of 16.5x,” says Tng. “Among its peers, [Avi-Tech] has the highest historical FY17 ROE and dividend yield of 14.3% and 5.7%, respectively.”
As at 11.53am, shares of Avi-Tech are trading half a cent higher at 49.5 cents.
