AVI-TECH: Increased interest in stock after turnaround

Burn‐in and testing EMS provider Avi‐Tech could see positive interest in the near‐term on two fronts:
1) 17.5% surge in SGX‐listed peer, Sunright
2) Potential exit from SGX Watch‐list

FY16 revenue

FY16 net profit

Dividend

$33.9m

+19.5%

S$6.2m

-5.0%

1.8 c

+25%*

Avi‐Tech's closest competitor, Sunright, leapt 17.5% over the past two days on a lack of company‐specific news.

This may result in a positive spillover effect to Avi‐Tech, which currently trades at a trailing P/E of 7.1x, or 44% discount to Sunright's 12.6x.

There could also be positive news flow stemming from the group's recent application to exit the SGX Watch‐List after posting its eighth consecutive quarter of profitability since 1QFY6/15.

"Balance sheet is healthy with net cash of $23.5m, or close to 60% ($0.138/share) of its current market cap of $39m.

"Further, the group declared a total DPS of 1.8¢ in FY16 (1¢ final, 0.8¢ interim) or a 48% payout ratio, translating to an indicative 7.8% dividend yield.

"As such, we do not rule out increased interest in the stock following its successful turnaround.”

-- Clement Ho (Maybank Kim Eng)

The fundamentals for Avi‐Tech are sound.

In FY6/11, the group erred in trying to develop its imaging equipment and energy efficient product segment, and subsequently had to write off the business in 4QFY14 due to aggressive price competition in the industry.

In the latest FY6/16 results, Avi‐Tech achieved a net profit to $6.2m (FY6/15: $6.6m; FY6/14: $9.9m loss) on the back of a steadily rising revenue of $33.9m (FY6/15: $28.4m, FY6/14: $23m), underpinned by increased demand from the recovering semiconductor industry.

(*Not including 1.4- cent special dividend paid in FY15)

AVI-TECH: Increased interest in stock after turnaround

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