“We think that 2QFY2023 revenue/net profit could be $175 million (+8.2% q-o-q, -26.1% y-o-y)/$21 million (+56.5% q-o-q, -27.7% y-o-y). 1H2023 revenue/net profit could come to $336.5 million/$34.4 million.” he adds.
As of May 4, Aztech had an order book of $661.9 million that it was trying to deliver in FY2023, says Tng. Aztech is also on track to commence operations by 2QFY2023 at a new 300,000 sq ft facility at Pasir Gudang, Malaysia, for manufacturing internet of things (IoT) devices and data communication products.
The analyst thinks that this facility could help Aztech gain a better competitive advantage building IoT devices, and thereby secure greater value orders from customers and win new customers in market segments such as security camera-related products.
Citing a May 9 report from Marketsandmarkets, Tng notes that the video surveillance market generated US$48.7 billion ($65.77 billion) of sales in 2022 and it could post a CAGR of 9.4% (2022-2027) to reach US$76.4 billion by 2027.
“We think there is room for Aztech to grow its IoT-enabled security camera business given its still small revenue size of US$0.59 billion as at end-FY2022,” he says.
In addition, Tng has a suggestion for Aztech to better align its dividend policy with the industry norm. He notes that most technology companies under CGS-CIMB’s coverage declare either interim and final dividend, or only a final dividend, but in FY2022, Aztech declared dividends for 3QFY2022 and 4QFY2022.
He notes that Aztech’s FY2022 dividend payout ratio was above the industry’s average of 34% and the second highest payout ratio after Venture Corp.
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“We think Aztech could consider aligning with the industry practice and switch to paying dividends on an interim and final basis,” he says. “Aztech is targeting a minimum dividend payout ratio of 30.0% for FY2023 (per its 2022 annual report).”
Tng’s new target price of $1.01 is now based on a 8.3x FY2024 P/E, 0.5 standard deviation below its three year average forward P/E, noting that inflationary cost pressures could remain a challenge for the rest of FY2023 and inefficiencies could add to costs as the Pasir Gudang plant is brought into operation.
As at 11.32am, shares in Aztech are trading 0.5 cents lower or 0.709% down at 70 cents.
