John Cheong and Heidi Mo of UOB Kay Hian downgraded their call on Aztech Global to "sell" from "hold", along with a target price of 46 cents from 65 cents previously, after the company's 1QFY2025 earnings that fell short of their expectations.
Given how manufacturers like Aztech are exposed to the trade war, the outlook is deemed challenging.
In their April 16 note, Cheong and Mo cut their FY2025 and FY2027 earnings estimates by 61 to 65%.
Their new target price of 46 cents is pegged to 1.1x FY2025 book value, which is based on -2sd to Aztech’s long-term P/B band.
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They had previously valued Aztech at 9x FY2024 earnings, pegged to 0.5SD above Aztech’s long-term mean PE.
Cheong and Mo explain that their new P/B-based valuation methodology is adopted to capture the potential earnings trough cycle and high cash value of Aztech of $316 million, or 40 cents per share, as of 1QFY2025.
In its separate note, DBS Group Research maintained its "fully valued" call and 52 cents target price on Aztech Global .
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Excluding the interest income, Aztech would have recorded a net loss of about $1.1 million, observes DBS in its April 16 note.
On a positive note, Aztech generated net cash of $18.6m from operating activities with tight working capital management, adds DBS.
Aztech is further building on its capabilities located in its Malaysia facility, positioned as a key site to support supply chain diversification.
A new automated production line is on track to be commissioned in 2Q 2025, with the facility already securing five new customers from the consumer, health-tech, and industrial segments and commercial production is expected to start in 2HFY2025.
However, contributions will likely be modest in the near term. With a significant drop in orders from the key customer and limited short-term uplift from new wins, DBS expects further downside risks to its FY2025 forecasts.
The company's share price, which closed at 73 cents on April 15, is now held up by a dividend entitlement of 10 cents that will go ex on April 17, says DBS.
Aztech shares dropped 10.96% to 65 cents as at 9.54 am.
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