Affin Hwang Capital upgrades MTAG (0213) MTAG GROUP BERHAD to 'buy' with higher target price of 98 sen
KUALA LUMPUR (Dec 8): Affin Hwang Capital has upgraded MTAG Group Bhd to "buy" from "hold", and revised up its target price to 98 sen from 82 sen, as it sees MTAG as a laggard sector play amid the recent run-up in the electronics manufacturing services (EMS) space, supported by its decent earnings growth backed by robust orders and expansion underway.
Affin Hwang Capital’s analyst Tan Jianyuan said in a Dec 7 note that MTAG is expected to take delivery of eight new machines, which should see current capacity expanding by 20%, in anticipation of robust future customers’ orders.
He also gathered that MTAG is in the midst of getting qualified for new customers recently secured by its EMS peers.
“The ongoing supply chain rerouting out of China will continue to be a multi-year secular trend, driving EMS sector growth. This should benefit MTAG’s earnings as a result of robust customer new order flows,” said Tan.
He raised MTAG's FY21 to FY23 earnings per share forecasts by 2% to 10%, expecting overall revenue to grow by 11% to 25% year on year over the FY21 to FY23 period on the back of its new capacities’ growth plan.
“The robust customers’ orders coupled with strong order backlog should help sustain the current high plant utilisation, which we have factored in an optimum 82% average utilisation.
“We continue to be positive with the key customer new product launch moving into 2021, which should see a higher mesh demand year on year,” said Tan.
Tan noted MTAG's revised target price was based on a higher 16 times price to earnings ratio multiple (14 times previously) of 2021 estimated earnings per share, which represents about 25% discount on the multiple used for the rest of its peers.
At noon break, MTAG rose 1 sen or 1.35% to 75 sen, valuing the group at RM511 million. The counter saw 3.09 million shares traded.
http://www.theedgemarkets.com/article/affin-hwang-capital-upgrades-mtag-buy-higher-target-price-98-sen
