Oppstar Berhad (Oppstar, 0275), the first listed IC design house will be making its debut on Bursa Ace Market today. It is principally involved in the provision of IC design services covering front end and back end, complete turnkey design services, post silicon validation services and training and consultancy services. Benefiting from the continuous technology advancement in high performance computing and artificial intelligence devices, global IC design industry is expected to grow 2.5% to c.RM847.8bn in 2023. Backed by an orderbook of RM34.3m as at end-January, we estimate Oppstar to register a 13.4% and 46.6% growth in net earnings for FY23 and FY24 respectively. BUY with a TP of RM1.08 based on 24x PER, which is Bursa Malaysia Technology Index 12 months forward PE.

Led by 3 Executive Directors with average 25 years of experience in the IC design industry, Oppstar is capable in designing application-specific integrated circuits (ASICs), system on a chip (SoCs), central processing units (CPUs), and field-programmable gate arrays (FPGAs) – design applications which typically fabricated on the process node technologies ranging from 20nm to 5nm. Oppstar had on 2022 secured projects further level up by securing projects using 3nm process node technology.

Incorporated in 2014, Oppstar had on board 7 clients which contributed 95.24% to its revenue as at September 2022. Oppstar’s enjoyed 3 years CAGR revenue growth of 77.96% for the past 3 years mainly attributed by its largest customer, XiaMen KirinCore IOT Technology Ltd which accounted 62.67% of its revenue.

Oppstar is planning to increase total workforce by 280 design engineers and technicians (from the current 217 engineers) to compete for more orders/contracts and tap into larger potential projects. It intends to expand its post- silicon validation services, the last stage of IC development which potentially increase its revenue going forward. Of the total IPO proceeds, RM50m has set aside for the hiring purpose and RM25m to established new offices in Penang, India, Singapore and Taiwan over the next 36 months.

Oppstar had recently announced its 3QFY23 financial result and achieved net profit of RM14.8m for the 9MFY2023 on the back of RM43.4m revenue translating to a net margin of 34%.

Opspstar has a healthy balance sheet with net cash position pre and post IPO. Oppstar has a dividend policy of distributing at least 25% of its earnings. With that, we forecasted dividend yield of 1.7% and 2.0% for FY24 and FY25 respectively.

Source: Rakuten Research - 15 Mar 2023

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