Mercury Securities Has a “Subscribe” recommendation on SFP Technology Bhd with a target price of RM0.51 on GY23 EPS of 3.7 sen and peer average PE of 15.2x. The IPO price RM0.30
It said that it likes the stock for its attractive growth prospect, and cheap valuations on the back of a growing engineering supporting industry (ESI) in Malaysia, expected to grow at a 5-year CAGR of 8.9% from 2022 to 2026 as forecasted by Protege. The target price represents a potential return of 86.6% over the IPO price.
The company plans to diversify its revenue stream by venturing into the semiconductor back-end inspection industry by manufacturing inspection equipment handler platforms equipped with electronics system and camera imaging. Designing and manufacturing of the generic machine frame is expected to begin in 1Q23.
SFP also plans to expand its production capacity via the construction of manufacturing plant 3, which would expand its floor space from 147k sq ft to approximately 467k sq ft. The new plant which is expected to be completed by the end of 2Q22 would enable SFP to take on additional business opportunities and qualify for potential new customers.
The company intends to purchase 1 new laser tube cutting machine and 41 new CNC 5-axis machines over the next 3 years. The new machines are expected to increase SFP’s maximum manufacturing production hour capacity by approximately 25.3%.
