Brokers’ take: Maybank, UOBKH see upside for Aztech Global on strong Q2/H1 earnings

ANALYSTS from Maybank and UOB Kay Hian (UOBKH) were optimistic on tech solutions provider Aztech Global : 8AZ 0%, following a higher-than-expected earnings results posted for Q2 and H1 for the financial year 2022, although UOBKH lowered the target price on the company due to derating in peers’ valuation.

Both research houses maintained a “buy” call on the company.

Maybank on Monday (Jul 25) raised its target price on Aztech Global to S$1.39, from the previous S$1.13. Valued against the stock price of S$0.80, the new target price represents a premium of 79 per cent.

It further revised its forecast earnings per share for FY22 upwards by 5 per cent to reflect the updated order book and better-than-expected margins, noting that Aztech’s H1 profit after taxation and minority interests (Patmi) of S$42.8 million was ahead of both the brokerage and street estimates.

UOBKH analyst John Cheong was similarly positive on the tech company as he noted that the strong results were boosted by an absence of production disruption as well as efficient coordination of components availability, execution and delivery of customer orders.

This comes despite the fact that manufacturing operations in Dongguan, China were suspended from Mar 15-20 to support the testing for Covid-19 and prevention of the further spread of Covid-19 infection. 

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“We continue to like Aztech as the proxy to high-growth Internet of Things (IoT) products, where we believe orders are starting to ramp up in 2022 and would sustain into 2023,” said Cheong.

UOBKH’s target price was however lowered by 6 per cent to S$1.46 due to a derating in peers’ valuation.

Maybank analyst Lai Gene Lih was also cautious on near-term risks for the company, particularly on the components front, despite signs of an easing.

Other downside factors include a slower-than-expected FY23 growth, which Lai believes may happen if a softer than expected economic backdrop results in an inventory correction at Amazon — a company he opines is a key customer of Aztech.

“We are more confident of nearer-term prospects as Aztech observes that sell-through is still robust, and that the key customer’s warehouses have capacity to receive finished goods,” said Lai.