PETALING JAYA: Edelteq Holdings Bhd
, which is en route to a listing on the ACE Market of Bursa Malaysia, is well-positioned to capitalise on the global semiconductor industry’s growth, according to TA Research.
Edelteq is a provider of engineering support to the chip industry.
The research firm noted that the company intends to expand capacity via construction of a new factory in Batu Kawan, Penang and plans to begin operations at the new site in March 2024.
“Estimated to cost RM15.2mil, the proposed factory with a built-up area of 43,500 sq ft will include production, storage, and office space.
“This will allow centralised control of manufacturing activities and improved management efficiency,” said TA Research.
The company’s largest revenue contributor is from the design and assembly of integrated circuit burn-in boards (BIB) and supply of printed circuit boards.
In the financial year 2019 (FY19) to FY22, they collectively accounted for 42% to 52% of the group’s revenue.
BIBs are used during integrated circuit burn-in test, which is one of the two stages of tests that integrated circuits typically undergo during the manufacturing process to test their reliability under extreme conditions.
TA Research said Edelteq’s customers are mainly multinational integrated design manufacturers and outsourced semiconductor assembly and testing companies located in Malaysia and abroad such as Singapore, Thailand, China, and the United States.
“This attests to its product quality, customer services, and proven industry track record,” it added.
Edelteq’s initial public offering (IPO) entails a public issue of 100 million new shares and an offer for sale of 43.2 million existing shares.
Collectively, they account for 26.9% of the group’s enlarged issued share capital.
At the IPO price of 24 sen per share, TA Research said Edelteq is priced at a trailing price-to-earnings (PE) of 17.7 times 2022 core earnings per share (EPS).
“As we assign a target PE of 20 times against its 2024 forecast EPS, we derive a fair value of 33 sen a share.
“This takes into account the group’s proven track record and expansion plans, which will allow it to capitalise on the next semiconductor upcycle,’ said TA Research, which did not rate the stock.
This fair value, said the research firm, also took into consideration the group’s experienced management team, established clientele, healthy double-digit margin, and robust balance sheet.
