CIMB starts Amtek Engineering (M1P.SG) at Outperform with $1.52 target price, pegged at 9X CY12 P/E. “This offers 41% upside potential (from Friday’s close) and values Amtek conservatively at about one standard deviation above its six-year mean P/E prior to its privatization in 2007.” 

House projects 39% earnings CAGR for FY10-13; “We see catalysts from strong sets of results, continuous strong growth in the automotive segment, and any M&A announcements.” 

 

CIMB says Amtek is a leading metal-stamping company in Asia with varied exposure to industries, rendering it less vulnerable to a slowdown in any particular sector. The house says a number of operational, strategic and organizational changes will start to bear fruit in FY11, presaged by good results in fiscal 1Q11 ended September. 

 

CIMB adds, Amtek intends to pay dividends of up to 50% of net profits; “Given its usually strong free cash flows, we believe Amtek can sustain such payments.” 

 

The stock is +9.3% at $1.18 midday.