Making its debut on the Ace Market today, Kulim-based Aurelius Technologies Berhad (ATech) is a one stop solution for electronic manufacturing service (EMS) provider in 3 main products categories: (i) Communication & IoT; (ii) Electronic Devices; and (iii) Semiconductor components. ATech benefits from the global digital transformation given the increasing demand for integrated circuits, memory and microchips within the global semiconductor industry. Amid the positive industry outlook and ATech’s aggressive expansion plan, we forecasted 3 years revenue and net profit CAGR growth of 12.0% and 27.4% to RM508.3m and RM34.4m for FY24. BUY with a target price of RM1.75 based on 20x PER FY23 (in line with EMS peers’ CY22 PER), premised on capacity expansion, growing order in semiconductor components and exponential earnings growth.

With 28 years track record in electronic industry, ATech has established a solid business relationship with its clientele across 3 continents namely Asia Pacific, America and Europe. The top 5 clients contributed to approximately 90.9% to its revenue in FYE 31 January 2021 and they are geographically diversified as 65% average revenue contribution streamed from 10 foreign markets over the past 3 financial years.

As at 31 August 2021, Communication and IoT products made up the largest at 83.5% to its total revenue, followed by electronic devices at 13.8% and semiconductor components at 2.7%. Moving forward, we expect revenue to be boosted from a public listed Chinese customer within the semiconductor components segment. ATech will be involved in design, production, research and development and sales services of wireless communication modules and solutions in the IoT field with total of 7 production lines committed to cater growing order by end of 2023.

ATech has commenced construction of 61,909 sq. ft manufacturing plant adjacent to its existing plant in May 2021, and to be completed by 1HCY22. Of the RM104.7m IPO proceeds raised, RM40m will be utilised on the purchase of new machineries and equipment for its surface mount technology (SMT) Lines, Automated Material Handling System and Automated backend inline testing and packing. With total of 15 SMT lines by end CY2023, the annual capacity will increase by 198.7% to 5,987m placement points. On top of that, management is working with a 3rd party on the development of lithium-ion battery pack system which is expected to be commercialise by end 2022. Looking at the aggressive expansion plan in terms of capacity, higher margin semiconductor components order and new ion lithium battery, we forecast net margin to expand from 4.2% in FY21 to 6.7% in FY24.

ATech will be spared from the recent foreign labour issue as it has 100% local labour force. The group has also imposed a dividend policy of up to 20% payout, as such we forecasted dividend yield to be at 1.29% and 1.41% for FY23 and FY24. Its balance sheet is also healthy with net gearing ratio of less than 0.1x post IPO.

Source: Rakuten Research - 16 Dec 2021