2021: Results In Line, Robust Orderbook Indicates Strong Growth For 2022
2021 net profit of S$74m (+34% yoy) is in line with our forecast. IoT devices continued to be a key growth driver. Dividend of 5 S cents was a positive surprise vs our estimate of 4 S cents. Aztech recorded a robust orderbook of S$762m as at 22 Feb 22, which is 22% higher than its 2021 revenue; this indicates strong revenue growth for 2022. Also, Aztech is optimistic on its business prospects on the back of strong global demand for IOT devices. Maintain BUY and target price of S$1.55.
RESULTS
• Strong 2021 results, in line with our expectations. Aztech Global’s (Aztech) 2021 net profit of S$74m (+34% yoy) is in line with our estimate. Despite a tough operating environment caused by global logistical and component challenges, revenue for 4Q21 grew 65% qoq and 5% yoy. IoT devices and data-communication products continued to be a key growth driver. In 2021, the IOT devices segment grew 40% to S$597m (which accounted for 96% of total revenue), buoyed by the core markets of North America and Europe which contributed over 96% of total revenue.
• Dividend surprised on the upside. On the back of the strong financial performance, Aztech has recommended a final dividend of 5 S cents per share; this is a positive surprise vs our estimate of 4 S cents. The dividend payout ratio of 51.9% was higher than the indicated distribution of at least 30% of net profits excluding exceptional items.
• Optimistic on 2022 business outlook, backed by robust orderbook. Aztech is optimistic on its 2022 business outlook as it expects its operations to benefit from: a) healthy global demand for IOT and data communication products, b) improving vaccination rates against COVID-19. To date, 98% of Aztech’s employees in China had been fully vaccinated and 46% have received their third dose. In Malaysia, its manufacturing facility is back to operating at 100% workforce after achieving a plant-wide vaccination rate of 100% with close to 17% of eligible workforce being vaccinated with the third dose, and c) Aztech recorded a robust orderbook of S$762m as at 22 Feb 22, which is 22% higher than its 2021 revenue, indicating a strong revenue growth for 2022.
STOCK IMPACT
• Committed to fortifying business resiliency. This year, Aztech is committed to fortifying its business resiliency through five key focuses to pivot growth and diversification across multi-sectors powered by the IoT trend. The five key focuses are: a) growing new IoT customers and products to enhance growth resiliency and widening its portfolio of high-quality customers, b) deepeniing manufacturing, technology and IoT expertise to drive innovation and growth in anticipation of new demands, c) excellent business execution capability to optimise factors of production and output, d) integrating sustainability into its business model and strategic formulation to future-proof business resiliency, and e) disciplined balance sheet and cost management to ensure adequacy of its financial resources for operational and expansion needs.
EARNINGS REVISION/RISK
• We have kept our financial estimates unchanged and introduced our forecast for 2024.
VALUATION/RECOMMENDATION
• Maintain BUY with a target price of S$1.55, pegged to an unchanged 13.3x 2022F earnings, which is still based on the Singapore and Malaysia peers’ average. We continue to like Aztech as the proxy to high-growth IoT products, where we believe orders are just starting to ramp up in 2021 and would sustain into 2022.
SHARE PRICE CATALYST
• More order wins.
• Better-than-expected cost management.
• Earnings or dividend surprise.