Investment Highlights

• Maintain BUY call recommendation on Cape EMS (Cape) wi an unchanged fair value (FV) of RM1.45/share, based on FY25 P/E multiple of 18x, implying FY24F PEG of 0.56, whic translates to a 13% discount to peers’ average of 0.64 (Exhib 1). We ascribe a neutral 3-star ESG rating to the company.

• Our FY24F-26F earnings are maintained following an analy briefing yesterday. These are the salient highlights:
  
  ➢ For wireless communication equipment, customer Mimo is expected to further ride on an expanded product portfo and increased market exposure to India in FY24 subsequent to its strategic acquisition by India-based J Reliance back in Mar 2023.
  
  ➢ For e-cigarettes, the group continues to tap on th underpenetrated e-cigarette market in USA, while rece M&A activity for Customer A in June 2023 will benefit Cap as the acquirer has more distribution channels (250-30 than customer A alone (20-40).
  
  ➢ Customer T, a Mongolia-based company for thermal energ devices, started a business relationship with Cape 1QFY23. For now, Customer T and Cape are collaborative developing diverse micro renewable energy system focusing on off-grid solutions for wind and water.
  
  ➢ For submetering systems, customer NextCentury h achieved product approval and penetrated the Australia market. In addition, the customer is at the midst certification in Mexico. With new line of products an markets, we are expecting a healthy growth in FY24F.
  
  ➢ For customer K&Q (vacuum cleaner), Cape anticipates t growth in FY24F will be underpinned by:
  
  (a) the recent launch of innovative models in 3QFY23 meet evolving customer needs,
  
  (b) end of 3-year shelf-life since 2020 amid strong deman
  
  (c) penetrating new segments of household appliances, an
  
  (d) new market exposures to Middle East and Turkiye, addition to existing US market.
  
  ➢ Recently, Cape acquired 3 new customers in the followin fields:
  
  (a) electric vehicle charging device and station,
  
  (b) tracking system for reusable packaging, and
  
  (c) marine technology.

• The stock is trading at an undemanding FY24F P/E of 14x vs. peers such as Nationgate’s 21x and Aurelius Technology’s 19x.

Source: AmInvest Research - 28 Feb 2024