CGS-CIMB Research analyst William Tng has kept “add” on Aztech Global with an unchanged target price of $1.82.
Tng’s target price is based on an unchanged price-to-earnings (P/E) of 15 times FY2022 earnings per share (EPS), which is an average for the Singapore technology sector.
To him, the group’s current price of $1.07 as at Sept 3 is an “opportunity” for investors to accumulate.
The counter’s share price has fallen 16.4% from its initial public offering (IPO) price of $1.28. It is also a 15.7% drop from its closing price of $1.27 since it announced its results for the 1HFY2021 ended June.
“We believe the current Covid-19-led component shortage concerns are priced in,” writes Tng in a Sept 3 report.
During the pandemic, the company has so far kept its production output in check despite the high number of cases in Malaysia.
Aztech has been managing the situation by ramping up its production capacity in China to make up for any shortfall in its Malaysian factory.
“Aztech’s performance has so far been in line with our expectations,” he adds.
The group has posted revenues of $115.9 million and $133.8 million for the 1QFY2021 and 2QFY2021 respectively.
However, a disruption in its supply chain due to component shortages and logistical constraints could affect its earnings for the 2HFY2021, notes Tng.
“We also believe that in the worst case scenario, Aztech will not lose any orders but see some orders being pushed into 1HFY2022,” he says.
To this end, Tng has identified share buybacks as a re-rating factor for the counter.
“Share buybacks could help lend support to its share price and we believe Aztech is aiming to obtain its share buyback mandate via an EGM before end-2021,” he writes.
“Downside risks to our call are component shortages and Covid-19 related supply chain disruptions. New customer wins and stronger earnings could re-rate the stock.”
Shares in Aztech Global closed 1 cent higher or 0.94% up at $1.08 on Sept 6, or an FY2021 P/B of 2.91 times and a dividend yield of 2.68%.
Photo: Samuel Isaac Chua/The Edge Singapore
