Brokers’ take: Analysts positive on Aztech Global outlook despite FY2022 forex hit
Bernadette Toh
MAYBANK Securities and DBS Group Research raised their target prices on Aztech Global on expectations of a stronger outlook for the group, driven by expectations of continued revenue growth in the near term and a strong order book.
This came even after the tech solutions provider’s latest full-year results largely missed both brokerages’ expectations, mainly due to foreign exchange losses.
Maybank upgraded its call on the stock to “buy” from “hold”, despite the “dismal” set of FY2022 results. It noted that the group’s core business remains strong and is expected to benefit from the diversification trend in China.
Its higher target price of S$1.02, compared with S$0.79 previously, is based on a higher valuation of seven times FY2023 price-to-earnings (PE), as opposed to the earlier multiple of six times.
The research house raised its FY2023 net profit after tax (NPAT) estimate by 10.4 per cent and FY2024 estimate by 12.4 per cent, on the expectation of stronger orders and with the assumption that “the worst is over” for Aztech Global.
Analyst Jarick Seet on Monday (Feb 20) noted that while Aztech Global’s earnings results are “way below” his estimates, the group would have reported core NPAT of S$123 million notwithstanding the forex losses, which would have represented a record year.
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This indicates a likely strong earnings rebound in FY2023, said Seet, who noted that the stocks’ valuations appear to be bottoming at 3.7 times ex-cash PE, based on FY2023 estimates.
On the other hand, DBS on Tuesday maintained its “buy” call, while lifting its target price for Aztech Global to S$1.15 from S$1.02. This factored in higher net margin assumptions for FY2023 and FY2024.
DBS analyst Ling Lee Keng noted that the new target price, which also implied a seven times PE multiple on FY2023 estimates, is half a standard deviation point of the stock’s average PE since its listing.
She viewed the stock’s current valuation of five times as “very attractive”, given how it is below the average multiple of about nine times.
Ling also liked Aztech Global for its attractive margins, compared to its peers in the downstream technology manufacturing space.
The analyst raised her net margin assumptions to 13 per cent for FY2023 from 11.4 per cent previously, and 13.6 per cent for FY2024 from 11.5 per cent. This resulted in a 30 per cent increase in earnings estimates for both financial years.
UOB Kay Hian (UOBKH) maintained its “buy” call on the stock, with an unchanged target price of S$1.05.
Though Aztech Global’s FY2022 earnings came in below expectations, the brokerage said it remains positive on the group’s outlook, given how its major customer’s orders are expected to grow.
“We continue to like Aztech as it is a proxy to high-growth Internet-of-Things products, for which we believe orders will continue to grow in 2023,” said its research team on Tuesday.
UOBKH nonetheless reduced its FY2024 earnings forecast by 6 per cent and revenue forecast by 10 per cent, to reflect the slower global growth outlook which could, in turn, affect future demand for consumer electronic goods.
Shares of Aztech Global were trading at S$0.84, up 5 per cent or S$0.04, as at 2.42 pm on Tuesday.
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