The analyst estimates the company’s FY2024 revenue to grow by 31.1% y-o-y to $141.6 million with Grand Venture Tech being able to secure orders from its new front-end semicon customers.
“Orders from these customers could gather pace into FY2025, leading to a 10.2% y-o-y revenue growth,” says Tng.
“At the macro level, management believes that there are opportunities arising from the ongoing outsourcing trend by US/Europe companies into lower cost Southeast Asia. According to management, Grand Venture Tech continues to make strides in onboarding its front-end semiconductor customers in the metrology, inspection, etch and wafer deposition segments of the semicon industry,” he adds. “The group is working on several first-article inspections for its semiconductor customers. A new plant dedicated to front-end customers is on track to be ready by end-4QFY2023 and production equipment have been installed.”
In the near-term, however, the analyst is expecting Grand Venture Tech to report a net profit of $1.61 million for the 3QFY2023 ended Sept 30, down 53.3% y-o-y and 14.8% lower on a q-o-q basis. The company’s 3QFY2023 revenue could have also dropped by 17.9% but increased by 0.2% q-o-q to $27.01 million, based on Tng’s calculations. Grand Venture Tech is expected to report its results on Nov 8.
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In FY2023, Tng expects Grand Venture Tech’s revenue to fall by 17.6% y-o-y to $108.0 million.
For the time being, Tng is retaining his earnings per share (EPS) forecasts for the FY2023 to FY2025.
“In its last net profit upcycle (three-year: FY2019 net profit of $3.1 million to FY2021 net profit of $17.6 million) Grand Venture Tech traded at an average P/E multiple of 11.6x. Rolling over to FY2025 using this average P/E multiple of 11.6x, our target price increases to 62 cents,” the analyst writes.
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“Hence, we upgrade our call on Grand Venture Tech to an ‘add’ from ‘reduce’ as we believe Grand Venture Tech could re-rate to this average P/E multiple as net profit growth resumes over FY2024 – FY2025,” he explains. “Previously [on Sept 25], we had valued GVT at 11.3x calendar year (CY) 2024 P/E (0.5 standard deviations or s.d. below its three-year average).”
As at 1.15pm, shares in Grand Venture Tech are trading 2.5 cents lower or 4.85% down at 49 cents.
