• ATA IMS (ATA) has temporarily shut down all its factories in Johor Bahru from 31 December 2020 to 7 January 2020 to undergo Covid-19 testing and sanitization works amid the rise in Covid-19 cases in the Dewani cluster, which was identified on 2 January 2021.

• Operations are expected to resume on 8 January 2021. As the shutdown was voluntary, ATA was able to communicate with its customers and reschedule its production output. Overall, the group expects no disruption to its production schedule, as it would be able to make up for the order backlog in the next couple of weeks. As such, we keep our forecasts unchanged.

• For the testing, our back-of-the envelope calculations indicate the total testing cost for its 10K workers would amount to approximately RM2mil to RM2.5mil, based on the assumption that each polymerize chain reaction (PCR) test costs around RM200.

• We maintain our BUY recommendation on ATA with unchanged forecasts and fair value of RM2.46/share. This is pegged to an unchanged CY21F PE of 18x – a 2x premium above its 1-year sector historical forward PE of 16x due to better prospects as the sector is a beneficiary from companies looking to diversify their supply chain away from China.

Source: AmInvest Research - 6 Jan 2021