PETALING JAYA: Maybank Investment Bank Research (Maybank IB Research) is positive about Aurelius Technologies Bhd ’s (ATech) growth and has placed a “buy” call on the group.
The research house did however trim its target price to RM3.05 from RM3.13, as the group shifted its fiscal year-end to December from January.
In a note, Maybank IB Research said things are looking up for the multi-component semiconductor provider as it gains a competitive edge in two high-growth sectors – the Internet of Things (IoT) and electric vehicles.
ATech has said it plans to diversify and enhance its IoT infrastructure together with its automotive-manufacturing segment, which will undertake more selective investments as the group aims to take on more projects and gain new customers.
The research house said ATech will stand to benefit from all this, as well as supply-chain diversification and foreign direct investments in the electrical and electronics sector.
“We remain optimistic about ATech’s growth and have forecast a 16% compounded annual growth rate in core earnings for the next three years. Signs of recovery from customer-destocking headwinds are evident and earnings growth will be supported by new-model wins and the acquisition of new customers, backed by the group’s expansion initiatives,” Maybank IB Research said.
Meanwhile, the research house said ATech’s nine-month revenue this year declined 12% to RM302.5mil, on the back of aggressive inventory downsizing by customers that led to a lower production volume.“Despite this, gross profit margin improved slightly thanks to a better product mix. Core net profit rose 2% year-on-year to RM25.8mil, driven by effective cost control and lower finance costs,” the research house said.
Revenue growth of 14% for electric devices cushioned the declines in communications, IoT and semiconductor components (C&I/SC).
“Looking at quarter-on-quarter performance, electric devices outperformed with a 29% sales increase, while C&I/SC experienced contractions of 13% and 40% respectively.
“The strength in the electric-devices segment is mainly attributed to increased demand from an oil and gas (O&G) customer, fuelled by recent activity in O&G sector,” the research house noted.
Furthermore, Maybank IB Research said that ATech’s order book as of Dec 11, had significantly increased to RM473mil from RM322mil on Sept 19, indicating the end of inventory destocking by customers.
The research house noted some of the risks it foresees included weaker demands from customers, a lower than expected costs pass through and operational disruptions from labour issues or component shortages.
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