We attended a physical briefing yesterday joined by Mr. Oh Kuang Heng (Group CEO), Mr. Heng Kok Lin (Head of SMBU) and Mr. Teo Chee Keong (Head of SEBU) and came away with some positive guidance. The group's orderbook currently stands at USD128.8m (RM573m), implying the next one-year sales order is already in the bag. Management shared its plan that it will expand the Semiconductor Solution Business Unit (SSBU) headcount more aggressively next year. Judging by the robust orderbook size, we think current valuation is unwarranted, trading at a FY25 PER of 20x. We reiterate our Outperform call with an unchanged TP of RM2.92 based on 33x FY25 EPS.

• 3QFY24 results round-up. During the quarter, the group's revenue grew 19.6% YoY to RM117.7m as Semiconductor Equipment Business Unit (SEBU) and Semiconductor Material Business Unit (SMBU) rose 22.7% and 16.1%, respectively. In contrast to the previous quarters, Taiwan was the biggest revenue contributor, making up 61%, followed by China (19.8%), SEA+India (13.5%), Korea & Japan (4.3%) and North America (1.4%). By segmental breakdown, Mobility & Wearables remained the key contributor, accounting for 77.3%, followed by High Performance Computing & Memory (17.2%) and Automotive & Renewable Energy (5.5%).
• Zoom into SEBU and SMBU. The equipment business recorded a loss of RM8.5m, dragged by Malaysia (-RM5.5m), China (-RM3.1m), Korea (RM1.1m), but partially offset by Taiwan, Singapore and the US (RM1.3m). The losses in Mi Equipment Malaysia were mainly due to forex losses while MI Equipment China and Korea continued to incur high operating expenses especially in research and development costs. It is worth noting that Mi Korea losses had narrowed from 2QFY24's RM4.6m to RM1.1m with more than 5 machines delivered. Stripping out the unrealised FX losses, we estimate that Mi Equipment Malaysia would have made a PBT of RM10.6m. SMBU posted a net profit of RM10m, mainly supported by Accurus Taiwan (RM14.8m), partially offset by losses in Accurus China (-RM2.6m) and Accurus Singapore (-RM2.1m).
• Other key highlights. The latest orderbook stands at USD128.8m, implying the next one-year sales order is already in the bag. Management also guided that the solder ball plant in Ningbo, China has installed 6 production lines with 3 lines in the running, and all lines will be utilised once another new customer completes the qualification process next year. The plant can accommodate a total of 12 lines. The SSBU, which focuses on the high-power semiconductor for automotive and renewable businesses, is in the process of collaborating with a third party on the packaging development. It plans to increase the headcounts of 40 to 80-100 by next year with the setting up of satellite offices in various parts of China. Lastly, the Mi Korea operation has received positive feedback for its Laser-Assisted Bonding machine, and it targets to achieve qualification next year.

Source: PublicInvest Research - 22 Nov 2024