Continue reading this on our app for a better experience

Open in App
Home Capital Broker's Calls

CGS-CIMB maintains ‘add’ rating on Avi-Tech, but cuts EPS due to cautious outlook

Lim Hui Jie
Lim Hui Jie • 2 min read
CGS-CIMB maintains ‘add’ rating on Avi-Tech, but cuts EPS due to cautious outlook
CGS-CIMB analysts William Tng and Caleb Pang have maintained their “add” rating on burn-in testing specialist Avi-Tech Electronics, and have raised their TP from 42.2 cents to 49.2 cents.
Font Resizer
Share to Whatsapp
Share to Facebook
Share to LinkedIn
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

CGS-CIMB analysts William Tng and Caleb Pang have maintained their “add” rating on burn-in testing specialist Avi-Tech Electronics, as they roll their valuation on the counter to FY21. The analysts have also raised their target price to 49.2 cents on the counter, up from their previous target price of 42.2 cents.

Tng and Pang, have, however, reduced their earnings per share (EPS) forecast for 21F and 22F by 0.04% and 0.02% respectively after the company reported a weaker than expected revenue figure and warned of a cautious outlook ahead.

Avi-Tech’s FY20 revenue, which fell 12.5% y-o-y to $29.4 million from the Covid-19 pandemic, came in 10% below the brokerage’s and Bloomberg consensus forecasts, although the company’s net profit, which grew 28.5% y-o-y to $6 million, came “in line” with CGS’s expectations at 11% above its forecast.

“Excluding $0.6 million in Covid-19 related government grants, FY20 net profit would have been in line with our and consensus expectations,” say Tng and Pang.

Gross profit margin (GPM) in FY20 was 35.8% compared to 31.4% in FY19, as the higher-margin burn-in services segment accounted for 38% of FY20 revenue vs 31% in FY19.

A final distribution per share (DPS) of 1 cent and a special DPS of 0.5 cents were declared.

In its results release on August 27, Avi-Tech says it is cautious on its FY21 outlook, citing the ongoing threats posed by the Covid-19 pandemic to economic recovery and the worsening trade war between the United States and China.

Avi-Tech’s strategy to ride out the current tough economic conditions is to focus on increasing its core competencies, reskilling and upskilling its workforce, improving productivity, and enhancing efficiencies while continuing to focus on stringent cost management.

The group has invested $0.5 million for a minority stake in a robotics software solutions company and will continue to explore new opportunities through strategic partnerships, business alliances or mergers and acquisitions (M&As) complementary to its business, and in emerging industries.

Looking ahead, Tng and Pang have also cut their FY21 and FY22 revenue forecasts by 4.8% and 2.3% respectively, given the slower order momentum and cautious outlook.

As at 1.53pm, shares in Avi Tech were trading 0.5 cents lower, or 1.1% down, at 43.5 cents, with a price to book ratio of 1.46 and dividend yield of 5.49%.

×
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
© 2024 The Edge Publishing Pte Ltd. All rights reserved.