AmInvestment upgrades ATA IMS, raises fair value to RM3.45

KUALA LUMPUR (March 19): AmInvestment Bank Research has upgraded ATA IMS Bhd to “buy” at RM2.90 and revised up its fair value (FV) to RM3.45 (from RM2.59) after raising its forecasts for the financial year ending March 31, 2022 (FY22) and FY23 by 14% to account for growth in orders for its main customer and crafting machine customer.

In a note today, the research house said it likes ATA due to its positive prospects, arising from the group being the purest proxy to its main customer’s growth prospects, its efforts towards being vertically integrated, and customer diversification opportunities arising from the US-China trade war diversion supported by the group’s modular expansion strategy.

Cited management, AmInvestrment said the order outlook for ATA’s main customer remains positive as the said customer had announced plans to double its product portfolio in the next five years, expanding its existing product categories as well as venturing into new areas, such as in artificial intelligence (AI), robotics and batteries.

“This bodes well for the group as it is the main customer’s largest contract manufacturer, producing the broadest range of products,” it said.

Meanwhile, ATA was awarded its third project from its crafting machine customer to produce a full-sized crafting machine yet to be launched in the market.

To recap, production for the group’s first project is running, while its second project will start at end-March 2021.

“ATA continues to be in discussion to secure a new original design manufacturing project from the customer,” it said.

According to the management, in FY22, its main customer is projected to contribute 70% of revenue, while the remaining 30% will come from other customers.

“Its FY22 growth is expected to be driven by both higher main customer orders as well as growth from others, such as the crafting machine customer,” it said.

The management also said its 228,000 sq ft factory and 150,000 sq ft warehouse are currently operational, with the factory expected to be fully utilised by mid-2021.

“The group is now on the lookout for a new factory, with approximately 350,000 sq ft floor space, to cater for potential orders coming from existing customers,” it said.

With a total of 15 surface-mount technology (SMT) lines running, its subsidiary Microtonics Technology Sdn Bhd is currently fully utilised.

Printed circuit board (PCB) and battery pack assembly caters for more than 95% of ATA’s internal demand, which has been supporting all new projects from its crafting machine customer, as well as needs of its main customer and other customers.

“The injection of Microtronics’ PCB and battery pack capabilities is aimed for mid-2021,” it said.

At 9.47am today, the counter had fallen four sen or 1.38% to RM2.86, valuing the group at RM3.49 billion.

Source: TheEdgeMarkets