Final dividend a surprise
- FY23 revenue was 4.6%/1.9% below our/consensus expectations but net profit was in line with our expectation as margin was better-than expected.
- Aztech’s new 300,000 sq ft facility is fully operational. Order book for FY24F was S$33.9m as at 17 Feb 2023.
- Reiterate Add with unchanged TP of S$1.23, based on 8.7x (3-year average) FY25F EPS. Final dividend of 5.0Scts was a surprise.
FY23 revenue missed but net profit in line
FY23 revenue of S$896.3m (+9.3% yoy) was 4.6%/1.9% below our/Bloomberg consensus expectations. However, FY23 net profit of S$100.0m (+48.9% yoy) was in line with our expectation though 2.0% below Bloomberg consensus’. FY23 net profit met our expectation despite the revenue miss as Aztech achieved a better product mix in FY23 resulting in pre-tax profit margin of 13.8% vs. 9.8% in FY22. The key surprise in FY23 results was a stronger final DPS of 5.0Scts, more than triple the final DPS of 1.5 Scts for FY22. Including the interim DPS of 3.0Scts, Aztech’s full-year DPS is 8.0Scts; this translates to a payout ratio of 61.7%.
S$333.9m order book for FY24F
Aztech announced an order book worth S$333.9m (as at 22 Feb 2024) scheduled for completion in FY24F. Its new 300,000 sq ft facility in Johor is already fully operational. Aztech’s customer diversification efforts include securing new US-based companies providing smart baby monitoring, health tech wearable and kitchen scrap management solutions as well as a Singapore-based health tech company involved in respiratory monitoring devices. The company has also launched IP (Internet Protocol) cameras under its own “Kyla” brand and guided that this range of products is gaining traction in the Singapore Pre School Educational segment. Aztech also plans to further integrate artificial intelligence (AI) in its video camera products to widen its customer base. Its major customer likely accounted for 70-80% of FY23 revenue, in our estimate.
Add for dividend support
We reiterate our Add call on Aztech as we think the company could maintain a 8Scts DPS over FY24-26F, rewarding investors with prospective 9.20% dividend yield in an environment where macroeconomic growth outlook is weak. Our TP is unchanged at S$1.23, still based on an FY25F P/E target of 8.7x, its 3-year average. We marginally tweak our FY24-25F EPS forecasts by 0.001-0.003% as we fine-tune our revenue, operating expenses and gross profit margin assumptions. Key re-rating catalysts: potential new customer wins and winning more projects from its main customer. Downside risks: order cancellations due to an economic slowdown affecting demand, and volatile foreign exchange rate movements affecting its financials.
