SINGAPORE (May 30): Memtech International, the components provider that serves the automobile, consumer electronics and mobile communications segments, is headed for a bountiful year, says UOB KayHian in a Tuesday retail report.
That’s mostly thanks to its in-house material sciences R&D team which has perfected the proprietary liquid silicone rubber (LSR) manufacturing process and enabled them to break into the Beats by Dre supply chain.
Currently, Memtech holds more than 120 patents. In order to have a better understanding of Memtech’s operations, analyst Nicholas Leow recently paid a visit to Memtech’s factory facility in Nantong, China.
This is one of the three manufacturing plants Memtech owns in China with the other two located in Dongguan and Kunshan. Leow reported factory activity remains high with plans to expand its warehouses.
“Our channel checks indicate that Memtech is one of the world’s leading precision engineering manufacturers of LSR products,” says Leow, “With automakers looking for ways to maximise fuel efficiency, LSR which is lighter than metal could possibly be a game changer in the industry. It would not surprise us if Memtech would become the subject of any M&A activity given their strong LSR capabilities.”
Meanwhile, Memtech is also trading at an unwarranted discount to peers, says Leow. With a dividend yield and ROE comparable to that of peers such as Sunningdale, Hi-P and Fu Yu, Leow believes the market has overly discounted Memtech’s prospects.
“We expect Memtech’s general discount to peers to narrow as the stock continues to re-rate in the quarters to come with more positive results,” says Leow.
UOB Kay Hian is maintaining its “buy” recommendation with a target price of $1.15.
Read also about how Memtech diversified into the automotive market in here and this week’s issue of The Edge Singapore (Issue 781).
Shares of Memtech are trading at 97 cents.
