Strong Growth And Stable Recurring Income Makes QES Group Attractive

Mercury Securities has maintained a “BUY” recommendation on QES Group Bhd with a revised TP of RM0.650 based on FY23F EPS 3.3 sen and peers’ average PE of 19.6x.

It said that it likes the stock due to its attractive growth prospects, a strong presence in the Asean region, and stable recurring income.

The stockbroking firm said that the group has an order book of RM110m as of Apr 2022 which is expected to provide earnings visibility for the next 3 to 6 months.

The company has a consistent annual recurring income of approximately an RM40million via the maintenance and service of large equipment installed base which contributes approximately 25% to group revenue. The cash balance remains strong above RM71.4million  as of 1Q22, in addition to a consistent net cash position since FY20.

It said that the company has completed the renovation of its Hicom- Glenmarie new factory at Shah Alam, running at 60% utilisation rate.

It expects the factory to be fully utilised by end of FY22. The new factory has an overall space of 81,000 sq ft, an increase from 39,000 sq ft, where 35,000 sq ft is allocated for manufacturing.

With the increased space, the company is able to increase its capacity from 50-80 machines to approximately 80-100 machines a year.

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