SINGAPORE (Aug 16): KGI is maintaining its “buy” call for Global Testing Corporation (GTC) with a target price of $1.77.

While growth outlook appears unexciting, KGI believes that the group is still an attractive investment given its yield and low stock valuation.

KGI analyst Renfred Tay notes that the group has a good track record of paying out dividends, having returned 20 cents per share this year and $1.50 per share last year. It had also been consistently buying back shares.

The group does not intend to implement a fixed dividend policy but has signalled its intention to return cash to shareholders whenever it is possible.

Although there are concerns as to whether the group has set aside enough cash for capital reinvestment given the group’s generous cash payouts to shareholders, GTC’s CEO says its testers have been upgraded recently and does not see the need for major capex spending in the next two-three years.

In 1H, the group posted revenue of US$15.3million ($20.5 million) which was above the research house’s expectation.

However, net profit of US$1.8 million was slightly lower than projected due to unrealised forex losses of US$0.5 million.

Tay believes that the group could perform better in 2H16 as opposed to 1H, in line with the general outlook guidance of the major Taiwanese semiconductor players.

Looking ahead, Tay believes that the 13% decline in revenue in FY15 and a forecast 8% decline in FY16 will be driven mainly by declining PC shipments to its largest customer.

However, he notes that growth from the next four largest customers remains strong.

Shares of Global Testing Corp closed unchanged at $1.215.

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