Avi-Tech Electronics - CGS-CIMB Research 2020-08-28: Net Cash Dividend Yield Play

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

Avi-Tech Electronics - Net Cash Dividend Yield Play

  • Avi-Tech Electronics's FY20 revenue 10% below our and consensus expectations.
  • Excluding government grants, FY20 net profit was in line with our and consensus expectations.
  • Reiterate ADD with a higher Target Price of S$0.492 as we roll over our valuation to FY21F.


Avi-Tech Electronics FY20 net profit in line

  • Avi-Tech Electronics (SGX:BKY)'s FY20 (Jul 2019 to Jun 2020) revenue fell 12.5% y-o-y to S$29.4m due to the impact from the COVID-19 pandemic. FY20 revenue was 10% below our and Bloomberg consensus forecasts.
  • Avi-Tech Electronics' FY20 net profit grew 28.5% y-o-y to S$6.0m, driven by a better revenue mix and reduction in operating expenses. FY20 net profit was 11% above our forecast and 6% above Bloomberg consensus’. Excluding S$0.6m in COVID-19 related government grants, FY20 net profit would have been in line with our and consensus expectations.
  • Gross profit margin in FY20 was 35.8% vs. 31.4% in FY19 as the higher-margin burn-in services segment accounted for 38% of FY20 revenue vs. 31% in FY19.
  • A final DPS of 1.0 Scts and a special DPS of 0.5 Scts were declared.


Cautious outlook

  • Avi-Tech Electronics is cautious on its FY21 outlook, citing the ongoing threats posed by the COVID-19 pandemic to economic recovery and the worsening trade war between the United States and China. In addition, Avi-Tech Electronics notes that Singapore’s Ministry of Trade and Industry (MTI) is projecting a 5-7% decline in Singapore's economy for 2020F. MTI also warned that even with an expected pick-up in the second half of the year, the global economic outlook continue to be significantly uncertain.
  • Avi-Tech Electronics’ strategy to ride out the current tough economic conditions is to focus on increasing its core competencies, reskilling and upskilling its workforce, improving productivity, and enhancing efficiencies, while continuing to focus on stringent cost management. The group has invested S$0.5m for a minority stake in a robotics software solutions company and will continue to explore new opportunities through strategic partnerships, business alliances or M&As complementary to its business, and on emerging industries.

Reiterate ADD on Avi-Tech Electronics






William TNG CFA CGS-CIMB Research | Caleb PANG Huan Zhong CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-28
SGX Stock Analyst Report ADD MAINTAIN ADD 0.492 UP 0.422



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