SINGAPORE (Feb 9): UOB Kay Hian is maintaining its “buy” call on Memtech International with a target price of $1.43.
In a Friday report, analyst Nicholas Leow expects the group to report a decent performance when it announces its upcoming 4Q17 results.
This comes on the back of the group indicating that it has secured new projects from Chinese automobile companies.
Memtech has highlighted two new customers – Next Car (NIO), a global startup that designs higher-performance premium electric, autonomous vehicles, as well as WEY, a premium SUV brand which is part of the Great Wall Motors Company.
“Even though NIO and WEY are still in their infancy, the potential for both companies to scale-up quickly is enormous,” says Leow.
In Dec 2017, NIO launched its first mass-produced ES8 model that costs about RMB 448,000 ($94,225). This model is about half the price of Tesla’s Model X.
The group managed to keep the prices of its cars low due to the advantage of Beijing state subsidies for electric vehicles, giving it an advantage over Tesla in China.
Meanwhile, WEY saw a strong showing at the Guangzhou Auto Show held in Nov 2017. It plans to hit the US car market and their SUVs meet tough US standards.
Tesla is also another one of the group’s key customers.
In 4Q17, Tesla was hit by production delays but Elon Musk, CEO of Tesla, says that obstacles to production were decreasing every week and the company should be on track to hit weekly production rates of 2,500 by end-1Q18 and 5,000 by end-2Q18.
Moreover, the group has secured two new project wins from Beats; Bose as a new customer; and JBL as a potential customer.
Memtech has also received tooling orders for a maiden project from a major US consumer electronics company for multiple projects in their pipeline which includes accessories for their phone model, and expects to go into mass production sometime in 2H18.
“We are very positive on this development for the consumer electronics segment as it demonstrates to us Memtech’s ability to not only retain existing customers but also gain new bluechip customers,” says Leow.
As at 4.08pm, shares in Memtech are trading at $1.28 or 10.4 times FY18 earnings with a dividend yield of 3.6%.
