Friday, January 17, 2014

Amtek Engineering -Signs of revenue bottoming; focus on margins (CS)

Amtek Engineering Ltd.
Price (13 Jan 14 , S$) 0.49
TP (prev. TP S$) 0.56 (0.56)
Maintain NEUTRAL
Notes from CS ASEAN Conference: Signs of revenue bottoming; focus on margins

● We hosted Amtek at the CS ASEAN Conference last week.

● After more than two years, there are signs of a bottoming in revenues: (1) The record tooling sales seen last year are finally driving revenue growth from new product launches (there is still upside left). (2) Industry segments like enclosures, consumer and automotive should continue to see an improvement in revenue growth. (3) Amtek is seeing good traction in new segments such as Life Sciences. (4) Even in slower growing segments, Amtek is trying to boost revenue growth by winning new customers.

● To counter a difficult revenue growth environment, management have been focussing on better cost control—higher automation levels to keep staff costs in control. Improving margins could provide further boost to the bottom line when revenues recover.

● At 7x 12-month forward consensus P/E and 1.2x P/B, valuations do not appear to be pricing in any growth or ROE improvements. A dividend yield of 6-7% also looks very defensive. A turn in the corporate capex cycle could drive a re-rating of the stock.

Server enclosures: Short-term prospects remain choppy, but signs of a turn in the corporate capex cycle and upside from cloud computing-driven demand could drive revenue growth. Short-term outlook depends on new product launches.

Mass storage: Segment remains in a structural decline.

Consumer electronics: Should continue to grow a steady low to high single digits driven by stable demand for white goods.

Automotive: Has been growing steadily driven by penetration to complex products. Chassis and steering columns fast growing part of the business. Should continue to see fairly robust growth. There is a lot more upside from this sector through new customers and products.

Industrial products: 2013 was affected by the slowdown in Europe. Growth should be at least high single digits in the near term.

Imaging and printing: Should continue to see steady growth driven by office automation segment.

New segments: Amtek has seen good traction in the Life Sciences segment driven by new product launches.

Focus on efficiency helping margin resilience

To counter a difficult revenue growth environment, management has been focussing on better cost control—higher automation levels to keep staff costs in control.

Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 15/01/14

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