PIE'S prospects remain bright from: (i) easing component shortage issues, (ii) seasonal ramp-up and higher allocation from its existing Telecommunications customer, and (iii) a slew of new customers on board. BUY with a Target Price of RM 1.90 based on 14.0x FY19E PER. We think there is good value proposition at current price level, with its Forward PER at only 12.0x, or a 15% discount to its closest EMS peers which is trading at 14.0x PER. 

The group is unlikely to face issue with component shortages in 1 H19 as it has already stocked up for 3 months ahead (vs. usual practice of 1-2 months). However, there is a possibility of the issue resurfacing by 3Q, should the adoption of 5G gains momentum.

Due to a shift in a new customer's supply chain provoked by the US-China trade war, the group started its maiden telecommunication device with its first shipment completed, while its second shipment close behind. Management expects contribution of its maiden telecommunication device to become meaningful by end of 3Q19. 

The group is currently working with its direct customer to develop a new audio-related accessory to be integrated into its telecommunication device to be sold as a premium product. Apart from this, we have also gathered that another new customer has engaged the group to manufacture PCBA (printed circuit board assembly) for its white goods on a consignment basis.

We are upbeat about the group's medium-term prospects given the slew of new customers in the pipeline.

Source: Rakuten Research - 6 Mar 2019