Results Analysis: FY23 results inline; stable orderbook and margins
- Strong set of FY23 results, inline; proposed higher DPS, attractive yield of 9%.
- Still healthy orderbook; new customers secured.
- New plant to service existing customers and target new ones looking to expand out of China.
- No change in forecasts, maintain BUY and TP S$1.25.
Strong set of FY23 results, inline; proposed higher DPS. FY23 revenue hit a record high of S$896.3m (+9.3% y-o-y) while net profit surged 48.8% y-o-y to reach the S$100m mark, inline with our expectations. The better FY23 earnings were mainly due to revenue growth, greater economies of scale, higher interest income and lower forex loss. In 2H22, the group booked in a forex loss of about S$54m. The IoT devices and data communication products account for 98.4% of the total revenue in FY23, with the balance from the LED lighting & other electronics products. In terms of geographical breakdown, North America accounts for 80.6%, followed by Europe 17.0%, and the rest were from China, Singapore and others. A 5 Scts DPS was proposed, bringing full year DPS to 8 Scts, (vs 4.5 Scts in FY22) representing a payout ratio of 61.8%. This works out to an attractive dividend yield of 9.1% based on current price. This is likely a pleasantly surprised for investors.
No change in forecasts, maintain BUY and TP S$1.25. Given the inline set of results, there is no change in our earnings estimates for FY24F and FY25F. Revenue is supported by decent orderbook. We expect revenue growth of 14% in FY24F and 10% in FY25F. Net margins of above 10% level is much higher than the average of low single-digit net margin of its peers in the downstream space. Maintain BUY and TP of S$1.25, pegged to 8.5x PE, which is the 3-year average PE, on FY24F earnings. Current valuation of 5.8x on FY24F earnings is attractive, at close to -1SD of its 3-year average PE.
Results highlight
| (S$m) | FY23 | FY22 | % change |
| FY23 vs FY22 | |||
| Revenue | 896.3 | 820.2 | +9.3 |
| Profit before tax | 123.7 | 80.7 | +53.3 |
| PBT margin (%) | 13.8 | 9.8 | +400 bps |
| Net profit | 100.0 | 67.2 | +48.8 |
| Net profit margin (%) | 11.2 | 8.2 | +300 bps |
| (S$m) | 2H23 | 2H22 | % change |
| 2H23 vs 2H22 | |||
| Revenue | 507.7 | 455.7 | +11.4 |
| Profit before tax | 72.7 | 30.3 | +139.8 |
| PBT margin (%) | 14.3 | 6.6 | +770 bps |
| Net profit | 57.1 | 24.3 | +135.0 |
| Net profit margin (%) | 11.2 | 5.3 | +590 bps |
Source: Company: DBS Bank
Still healthy orderbook. The orderbook, secured as at 22 February 2024, was $333.9m. The majority of the orderbook secured is scheduled for completion in FY24. The order lead time has normalised from 9-12 months during the pandemic to 2-3 months post-pandemic.
New customers secured. The group has secured some new customers, including US-based companies providing smart baby monitoring, health-tech wearable & kitchen scrap management solutions and Singapore-based health-tech company in respiratory monitoring devices.
New plant to service existing customers and target new ones looking to expand out of China. The 300,000sqft Pasir Gudang facility commenced production in 3Q23 and is now fully operational. The expanded manufacturing footprint in Malaysia supports the group’s growth, and to cater to the production diversification requirements of its customers, riding on the China +1 trend.