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ISTONE (0209) I-Stone Berhad: Winner from the PENJANA Economic Stimulus

Nowadays, it is difficult to understand the new Malaysian government. At a time when the government should get Malaysians back to work ASAP and every single dollar from stimulus packages should be channelled to workers and affected households and companies, the government announced the following in the PENJANA stimulus:

The funny thing is automation and digitalisation will reduce the need for workers. This is the time to get Malaysians into jobs, not remove them. Anyhow, a winner from these stimulus measures is I-Stone Group Berhad. 
What does I-Stone do? Here are descriptions as shown in the company website:

I-Stone is actually a mix of Vitrox, Penta, UWC (manufacture automated testing machines) and Greatech (manufacture automated production lines). The main difference between I-Stone and the others are just different main customers and different geographical reach. For example, Greatech's main customer is solar panel giant, First Solar while I-Stone's main customer is household goods powerhouse Dyson. Meanwhile, I-Stone derives most of its revenue in Malaysia whereas the rest gets them from overseas.
When the government throws money at companies to automate their manufacturing process, I-Stone will be a beneficiary. Previously, the government announced matching grants and loans to encourage companies to automate but the question is - if you have a company earning RM1-3million or less in profits per year (as in the case of most SMEs), will you fork out RM500k to RM1million of your own money for automation? The answer is most likely no. With the RM1million grant (grants are free money, do not need to be repaid) given to companies now to automate, many companies will rush to apply for the grant to automate.

How to value I-Stone?
We just have to look at the PE multiples of its comparables right now:
Vitrox: 52x
Penta: 28x
UWC: 45x
Greatech: 35x
I-Stone is now trading at a PE multiple of 28x.
If we use the average PE of its peers of 40x, TP for I-Stone will be RM0.23 (39% upside). This is within the normal price range (RM0.205 to RM0.24) it was trading at before March 2020. In their most recent earnings announcement, profits also rebounded from the low of RM348k in 4Q19 to RM2.8million in 1Q20. With world markets rallying and on track to hit records soon, it is a matter of time before I-Stone share price goes back to their previous levels. 

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