SINGAPORE (Aug 11): CIMB is keeping its “add” rating on Memtech International after the global components solution provider yesterday reported earnings of US$4.9 million ($6.7 million) for the second quarter ended June, reversing from its loss position in 2Q16.
See: Memtech back in the black with 2Q earnings of US$4.9 mil on higher revenue
In a Thursday report, analysts Ngoh Yi Sin and William Tng say the improved results were as expected, with 1H core net profit deemed in line at 44% of their full-year forecast as they anticipate a seasonally stronger 2H17.
In their view, Memtech is currently trading cheaper than the industry average and hence offers investors some safety margin.
While the group’s automotive segment appeared to be losing steam over the recent quarter with a 6% q-o-q sales decline, Ngoh and Tng say this does not overly concern them as they expect new orders from the group’s existing customers to kick off in the second half of the year to meet their FY17 forecasted sales of US$84 million.
“Revenue contributions from telecommunications and industrial & medical segments were stable in 2Q17. By leveraging on its liquid silicone rubber (LSR) capabilities and multiple injection technology, management sees opportunities in the acoustic and smart home areas,” note the analysts.
“The stock offers 3-5% dividend yield, with upside potential from the US$6 million proceeds from the disposal of two land assets… Downside risks to our ‘Add’ call include unexpected order delays or cancellations. Synergistic M&A opportunities and special dividends are potential re-rating catalysts,” they add.
As at 11:37am, shares in Memtech are down by 5.8% at 98 cents.
