CGS-CIMB analyst William Tng is decidedly optimistic on Grand Venture Technology following the release of its 1QFY2021 ended March business update.

Noting that it’s the first voluntary update that Grand Venture Technology has provided since listing in January 2019, Tng highlights the company’s 435% y-o-y growth in net profit to $3.3 million, representing 41.1% of Tng’s full-year estimates.

The stronger net profit followed revenue growth of 59% y-o-y on the back of better performance of its semiconductor segment (+68.5% y-o-y), life sciences segment (+38.4% y-o-y) and the electronics, medical & others segment (+42.2% y-o-y).

SEE: Grand Venture Technology reports 1QFY21 earnings of $3.3 mil, up 434.9%

“The strong performance in its semicon segment was driven by the global ramp-up in demand for semiconductor chips while the life science segment benefited from higher production upon receiving customers’ qualification. In the electronics, medical and others segment, Grand Venture Technology benefitted from contribution from a customer involved in surgical microscope,” Tng explains.

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Tng believes that “a new chapter of growth is unfolding” for the group, with efforts to onboard new customers and products in the last two years starting to show fruit.

To that end, he has raised his FY2021-FY2023 revenue estimates by 38.5%-42.4% to reflect the group’s new customers and products as well as its progression to more assembly work. Consequently, Tng’s earnings per share (EPS) forecasts for the corresponding period are raised by 81%-97.5, resulting in a higher Gordon Growth-derived P/BV multiple of 5.37 times, up from 3.31 times previously.

“Our target price, based on FY2021 book value per share of 20.9 cents, is raised to $1.12, versus 60.5 cents previously,” he says.

M&A opportunities also remain on the horizon for the group. “With $23.5 million in net proceeds from its March 2021 placement to Novo Tellus, the group will continue to seek growth via M&As and increase its competencies in advanced manufacturing techniques, including the ability to machine advanced materials such as quartz and ceramics," he notes.

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While accretive M&As and stronger results are expected to be re-rating catalysts, Tng notes that key risks include potential work stoppages at factories due to the Covid-19 pandemic. 

As at 3.48pm, shares in Grand Venture Technology are up 0.5 cents or 0.61% higher at 83 cents.