Analysts have assigned a fair value of RM0.76 against the Initial Public Offering (IPO) price RM0.50 for Northeast Group Berhad (Northeast), citing operational expansion and sustainable growth in the semiconductor and telecommunications sectors.
Northeast has a strong 20-year track record in the industry, and is principally involved in the manufacturing of precision engineering components used in the photonics, E&E, semiconductor, telecommunication and optoelectronics industries.
Over 70% of its revenue is generated from exports, owing to its key strength in meeting stringent internal QA/QC standards and internationally recognised certifications. The group has consistently improved its PAT margins, rising from 17.5% in Financial Year 2021 to 19.7% in 2023, and standing at 19.9% as of Financial Period YTD 2024.
Malacca Securities has projected a 3-year earnings of 14.9% for Northeast, with core PAT expected to reach RM17.8-RM24.2m over the next three years. This growth will be supported by the expansion of operational facilities and sustainable growth in the local and global semiconductor and telecommunications sectors.
Northeast’s three existing factory plants are fully utilised. In Financial Year 2023, the group acquired a land lot in Penang for the purpose of constructing a new factory, costing RM40 million and expected to be in operation in 2027.
Looking ahead to 2025, the World Semiconductor Trade Statistics (WSTS) projects a 30.5% (CAGR, Compound Annual Growth Rate) or 12.5% growth in the global semiconductor industry, reaching an estimated USD687 billion (in trade volume).
This growth will primarily be driven by the Memory and Logic sectors, with each expected to exceed USD200 billion in 2025. The Memory sector is projected to grow over 25%, while the Logic sector is expected to increase by more than 10%, compared to the previous year.
Analysts expect the semiconductor industry of the developing regions to expand, in particular the Americas and Asia Pacific (APAC), which are set to maintain double-digit year-over-year growth rates.
