SINGAPORE (Jan 30): RHB is maintaining its “buy” call on Avi-Tech Electronics with a target price of 59 cents, which implies 12 times FY18 earnings and 4.6% dividend yield.
See: RHB remains positive on Avi-Tech Electronics' long-term growth prospects
In a Tuesday report, analyst Jarick Seet says he remains positive on the group’s outlook as it should benefit from an increased demand for electronics in the automotive sector, as well as the Internet of Things (IoT).
Valuations for Avi-Tech are now “very attractive” when compared to its listed Malaysian peers following the stock’s recent share price correction, he adds.
“Going forward, we expect the positive momentum to continue into 2QFY18, with stronger NPAT growth due to continued strong demand from its customers for its services, as well as sustained strength in the semiconductor industry. We also expect Avi-Tech to continue rewarding shareholders with an interim dividend, as a result of its strong performance,” says Seet.
Avi-Tech’s earnings growth is forecast to remain stable at 10-15% y-o-y for FY18.
The analyst further sees potential for the acquisition of a yield-accretive target in the near-term, given its war chest of over $32.4 million. This would in turn allow Avi-Tech to enhance NPAT drastically, in his view, which would serve as a positive re-rating catalyst.
“Avi-Tech’s CEO and majority shareholder, Mr Lim Eng Hong has bought shares in the open market over several occasions in 2017, with the latest done on 20 Dec 2017 at 45.6 cents per share. In total, Mr Lim has bought c.1.33 million shares at an average of 41.5 cents per share. We think this is a positive testament to Avi-Tech’s strong fundamentals and positive outlook,” he concludes.
As at 9.56am, shares in Avi-Tech are trading flat at 51 cents, or 1.62 times FY18 book value.
