Mi Technovation Bhd (“MI”) prospects and fundamentals remain intact as it is well-positioned as one of the leaders in manufacturing of advanced packaging equipment for the semiconductor industry backed by global Tier-1 semiconductor customers. Recommend BUY with a target price of RM2.08 based on 18x PER FY20 as per industry peers.
The group commenced operation in Dec 2013 with a single flagship product specialising in wafer level chip scale packaging (“WLCSP”) die sorting machine. WLCSP is one of the most advanced form of packaging used in semiconductor industry due to its performance strength and cost advantages. Having operated in less than a decade, MI has garnered premium customers from the global Tier-1 OSATs and IDMs namely Advanced Semiconductor Engineering (“ASE”), Amkor Technology and Inari Amerton, just to name a few. MI was also the award-winning supplier in year 2017 and 2018 of ASE, a Taiwan based world’s top 3 OSAT player, reinforcing high product quality emphasised by the group.
The group continues to expand its product offerings within the semiconductor supply chain including the launching of final test and vision inspection equipment. Also, we are positive on MI’s venture into the Automation & Robotics and Artificial Intelligence division. Despite the insignificant contribution from the division currently, we believe it provides ample opportunities for MI to upsell the services to existing customers besides targeting new clients tapping on the automation adoption within the Industry 4.0. Meanwhile, the construction of Bayan Lepas facilities has been completed while Plant 2 located at Batu Kawan is on track with 22% completion.
MI has a healthy balance sheet sitting in a net cash position and adopts a dividend policy of 20%. We expect earnings growth to come in FY20 as China is in pursuit of building its own semiconductor supply chain eco-system which in turn will benefit MI underpinned by its strong presence in Northeast Asia (Taiwan, China and Korea).
Source: Rakuten Research - 26 Aug 2019
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