Stripping out the one-off expense of RM7.7m incurred in 1QFY21, Mi Technovation saw its 9MFY21 earnings jump 36% YoY to RM55.1m. The results made up 68% and 72% of our and the consensus expectations, respectively. The weaker-than-expected results were mainly due to a decline in semiconductor equipment business unit margin due to stiffer competition in China and a hit from metal prices as well as a steep increase in logistics costs. A first interim DPS of 3sen was declared for the quarter. Despite the weaker-thanexpected results, we make no changes to our earnings forecasts as we expect to see a strong catch-up in the final quarter. Maintain Outperform call with an unchanged TP of RM5.78 based on 45x FY22 EPS.

• 3QFY21 revenue surged 77% YoY to RM114m. The encouraging topline growth was mainly driven by new contribution from the semiconductor material business following completion of the acquisition of Taiwan-based Accurus Scientific on 19 April. Led by the steady Mi Series equipment sales to China and Taiwan, semiconductor equipment sales remained at RM64m, making up 56.4% of the Group’s topline. The flattish sales growth was mainly attributed to the change in customer order trend where some orders were deferred to the subsequent quarters to suit customers’ capex spending timing and revised new capacity schedule which were locked-in in the past quarter in anticipation of the full lock-down. The remaining sales were contributed by the semiconductor material business, which made up of RM49.8m, driven by stronger demand from customers who are in 5G, IoT, HPC and automotive industries.

• Bottomline jumped 66% YoY. During the quarter, the Group’s earnings rose from RM13m to RM21.6m on the back of equal contribution from both equipment and material businesses. Semiconductor equipment business earnings fell 21.5% YoY to RM10.2m as pre-tax margin slid from 20% to 15.8% due to higher costs in materials and logistics as well as stiffer price competition from China. Meanwhile, the semiconductor material business saw the first full quarterly earnings contribution of RM11.4m on the back of 22.9% pre-tax margin. Also, there were some additional expansion-related expenses incurred for the operations in Taiwan, Korea and China.

• Positive prospects. The Korean operations has seen its maiden sale of laser-assisted bonding machine after 2 years in product development. With the sales, it is now qualified as one of the laser-assisted bonding providers in the high performance chip segment. In China, it has secured pilot orders for a new product segment, test handler solutions, following the recent acquisition of a 22.64% stake in Talentek. The semiconductor business in Taiwan has successfully shipped the first two fully local-assembled Vi series to customers. Lastly, its new solder ball plant in Ningbo, China, has obtained Temporary Occupation Permit and pilot run has commenced to prepare samples for customers’ evaluation.

Source: PublicInvest Research - 1 Nov 2021