Brokers’ take: CGS-CIMB raises Aztech Global target, expects Q3 profit to rise 56%

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Vivienne Tay

Published Thu, Oct 12, 2023 · 01:02 PM

The technology solutions provider could benefit from greater economies of scale and automation. PHOTO: BT FILE

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CGS-CIMB has raised its target price on Aztech Global to S$1.23 from S$1.11, implying a potential upside of 41 per cent from the counter’s last trading price of S$0.87 as at the midday trading break on Thursday (Oct 12).

The technology solutions provider, which is listed on the Singapore Exchange’s mainboard, was trading 3.6 per cent or S$0.03 higher at the time.

The target price increase came after CGS-CIMB rolled over its valuation base year on the company to FY2025, it said in a report on Wednesday. The research team also raised its price-to-earnings multiple target to a three-year average of 8.7 times from 8.3 times.

It reiterated its “add” call on the stock, given Aztech Global’s earnings per share (EPS) growth prospects. Its EPS forecasts remain unchanged.

Greater economies of scale and automation will help the company better manage its cost structure, said analyst William Tng.

He estimates Aztech Global could post a 56 per cent rise in third-quarter net profit to S$32.5 million, as Q3 is the busiest period for technology manufacturing-related companies.

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The group is slated to deliver a significant portion of its order book (S$594.5 million as at Jul 21) by the end of 2023.

Furthermore, CGS-CIMB expects Aztech Global’s Pasir Gudang plant to help support FY2024-25 revenue growth. Following the plant’s commencement of production in Q3, the group’s total manufacturing built-up area grew to 846,000 square feet.

“Customers will also have further flexibility in deciding where to have their products manufactured,” Tng noted.