Aurelius Technologies Berhad - Headline profit heavily impacted by forex losses
Wed, 27-Nov-2024 07:40 am
by Jayden Tan • Apex Research

Counter

ATECH (5302)

Target Price (RM)

3.83

Recommendation

Buy

Summary

  • 3QFY24 CNP of RM14.0m (+44.5%, -12.6% qoq), brings9MFY24 CNP to RM45.8m (+61.7% yoy) which was within our expectations, accounting to 77% of our full-year forecast.

  • We expect the earnings growth to gather momentum especially in FY25, driven by a robust orderbook and the onboarding of new customers and rollout of additional products.

  • Maintain our BUY recommendation with an unchanged target price of RM3.83, based on 23.0x PE multiple pegged to FY25 EPS of 16.7 sen.

     

Results Review

  • Results review. In 3QFY24, net profit was significantly impacted by forex losses (weaker USD), recording only RM800k (-95.1% qoq and -92% yoy). GP margin also contracted due to higher material costs booked earlier at a higher USD/MYR exchange rate. Notwithstanding the forex impact, revenue increased by 8.9% qoq and 67.8% yoy to RM165.7m, driven by resilient demand from legacy customers, introduction of new product lines, and the commencement of production for a new customer. The board declared a dividend of 3.1 sen per share during the quarter.

     

  • CNP within expectations. 3QFY24 core net profit (CNP), after excluding forex losses (RM6.7m realised and RM10.7m unrealised) and their tax impact (assumed tax rate: 24%), stood at RM14.0m. This brings 9MFY24 CNP to RM45.8m mil, accounting for 77.0% of our full-year CNP forecast of RM57.5m.

     

  • Operations Highlights. During the quarter, GP margin was impacted by higher COGS, as materials were purchased earlier when the USD/MYR exchange rate was at higher level, while revenue was booked at a weaker USD/MYR rate. Despite that, all three main segments demonstrated resilience in revenue: Communication and IoT Products (+11% qoq, +73% yoy), Electronics Devices (+2% qoq, +41% yoy), and Semiconductor Components (-11% qoq, +72% yoy). The latest order book as of 18 Nov stands at RM475.0m (excluding contributions from Customer F and new customers), a slight decline from RM489.0m in last quarter, as customers are shifting towards shorter-term orders due to an improved supply chain environment.

     

  • Industry Highlights. Despite the ongoing headwinds from global economic uncertainties and the fluctuations of USD/MYR, the trend of supply chain diversification and relocation away from China continues to benefit local players.

     

  • Outlook. We remain optimistic over the Group’s strong growth prospects for FY25 and beyond. This is supported by the P5 capacity expansion, which is expected to be operational by Dec 2024, catering to a robust order pipeline from both legacy and new customers, including new products. Additionally, production ramp-up for customers at P5 is anticipated to commence in early FY25. For the next quarter (4QFY24), we expect a strongbottomline, driven by the recovery of USD/MYR since Oct 2024 and a low tax rate, aided by a substantial deferred tax asset.

     

  • Valuation. No changes to our earnings forecast. We maintain our BUY recommendation, with a target price of RM3.83.

     

  • Risks. Fluctuation of forex. Uncertainties of Trump’s tariff policies.

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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

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Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.390206 4.425718
EUR 5.008717 5.015095
CNY 0.603029 0.603828
HKD 0.565660 0.569770
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