Avi-Tech Electronics - RHB Invest 2020-07-07: Strong 2H20F Expected

AVI-TECH ELECTRONICS LIMITED (SGX:BKY) | SGinvestors.io AVI-TECH ELECTRONICS LIMITED (SGX:BKY)

Avi-Tech Electronics - Strong 2H20F Expected

  • The semiconductor sector’s slowdown has likely bottomed out, and Avi-Tech Electronics’s quarterly performance should improve ahead.
  • Early this year, Avi-Tech Electronics reported a strong 2Q20, with PATMI surging 46.7% y-o-y to SGD1.4m. See Avi-Tech Electronics Announcements. We expect a strong 2H20F and overall estimate FY20 will be a much better year, as earnings likely bottomed out in FY19.



Burn-in testing for the automotive component continues to grow strongly.

  • With the sector slowdown in effect since 2018, we believe the correction has bottomed and from here on the outlook should improve, especially with China and the US having struck a Phase 1 trade deal. Avi-Tech Electronics (SGX:BKY)’s performance should continue to pick up in 2HFY20, with strong growth from burn-in services, which have much higher gross margins. This, coupled with previously implemented cost-cutting measures, should help improve margins as well.
  • Avi-Tech Electronics’s gross margin improved significantly to 39.7% in 2QFY20 (from 27.9% in 1QFY19). We expect it developed a strong performance in 2HFY20.


Staying alive with net cash in a critical industry.

  • With a net cash balance sheet and strong operating FCF, management should continue to reward shareholders with attractive dividends despite the drop in profits in the previous year.
  • Avi-Tech Electronics operates in the burn-in and testing segment of the semiconductor industry and focuses mainly on the automotive sector. The company plays a crucial part in the supply chain, which would see its demand for its services still growing despite a world-wide pandemic still on-going.


Attractive yield of 5.6% for FY20F.

  • For FY19, a total of 2.3 cents in DPS were declared, translating into a PATMI payout ratio of 84.7%. Due to its strong performance, a higher interim DPS of 1 cent was paid in 2QFY20 vs 0.8 cents a year ago. See Avi-Tech Electronics Dividend History.
  • We expect management to reward shareholders with at least the same amount going forward, despite a special dividend given in FY19.


M&A opportunities available at such drastic times.






Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | https://www.rhbinvest.com.sg/ 2020-07-07
SGX Stock Analyst Report BUY MAINTAIN BUY 0.500 SAME 0.500



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