SINGAPORE (Feb 19): Avi-Tech Electronics on Feb 13 announced that its 2Q18 earnings fell 6.7% to $1.67 million, but 1H18 earnings was $3.38 million, 3.8% higher than $3.26 million a year ago.
2Q18 revenue increased by 8.1% to $9.41 million, mainly contributed by the Burn-In Services business segment and the Manufacturing and PCBA Services business segment, which brought gross profit for the quarter to $3.17 million, 16.2% higher y-o-y.
See: Avi-Tech posts 6.7% drop in 2Q earnings to $1.67 mil
Following the results announcement, RHB is maintaining its “buy” call on Avi-Tech with a target price of 59 cents.
In a Thursday report, analyst Jarick Seet says, “We believe that Avi-Tech Electronics’ (Avi-Tech) long-term growth prospects are positive, in line with the digitalisation macroeconomic trends and increased electronics in the automotive sector.”
The analyst views that a conservative and stable annual net profit after tax (NPAT) growth rate of 10-15% would be sustainable over the longer term.
In 1H18, the group declared a cash interim dividend of 1.3 cents per share, which is a 30% increase y-o-y, mainly due to a net cash balance sheet and strong operating FCF.
“We think this is a strong statement, with regards to rewarding shareholders and on its business fundamentals,” says Seet.
The analyst has also increased the Fy18 dividend payout ratio projections to 70% from 50% previously, which would result in a projected yield of 6.9%.
Meanwhile, the group has a $32 million war chest at its disposal and is looking at accretive acquisitions, as well as new avenues of growth.
The analyst believes that with an accretive acquisition, the group will be able to enhance its NPAT drastically, with a combination of debt and cash financing.
On the other hand, the group’s burn-in services segment is well-positioned to benefit from the rising sophistication of vehicles.
“With other disruptive technologies in the Internet of Things (IoT) era, as well as the march towards cloud businesses and smart cities, we believe another wave of demand for semiconductor burn-ins and other related services is coming,” says Seet.
As at 11.30am, shares in Avi-Tech are trading 2 cents or 3.16% higher at 49 cents
The stock is also trading 10.2 times Jun-18F recurring earnings with a dividend yield of 6.9%.
