RHB highlights Aztech Global’s positive growth outlook in an unrated report

RHB expects Aztech's capacity to expand.

RHB Bank Singapore analyst Alfie Yeo has taken a closer look at Aztech Global 8az following its visit to the company’s new plant in Pasir Gudang, Johor.

In an unrated report, Yeo notes that Aztech is operating three manufacturing plants, one in Dongguan, China while the other two are in Johor’s Gelang Patah and Pasir Gudang.

The company’s wholly-owned subsidiary IOT Manufacturing operates the two factories in Johor, manufacturing data communication, electronic and electrical products such as LED lights.

Its first plant at Gelang Patah, which grew $216 million in internal sales by FY2022, now operates at full capacity. All of IOT Manufacturing’s sales are invoiced internally to its Singapore entity (Aztech Technologies) under the Malaysia manufacturing segment as inter-segment revenue, Yeo points out. The Malaysia manufacturing operations had a profit before tax of $2.6 million in FY2022.

Aztech’s Pasir Gudang facility is close to the Pasir Gudang port which facilitates exports, while the Gelang Patah plant is located near Tanjung Pelepas Port. The Pasir Gudang plant has eight surface mount technology (SMT) production, two wave soldering, 18 products assembly and test as well as four packaging lines. Yeo expects its capacity to expand, including the ramp-up of SMT lines in the coming quarters.

For its 3QFY2023 ended September, Aztech’s earnings grew by 49% y-o-y to $31 million. This was driven by a 17% revenue growth y-o-y to $283 million, led by sales of internet of things (IoT) devices and data communications product segment.

Yeo says Aztech’s 3Q tends to be the seasonally strongest, as its US customers boost production ahead of the 4Q Thanksgiving as well as Christmas holiday sales seasons. The company’s order book is robust at $322.7 million as at Oct 16, with most of this to be realised as revenue by the end of FY2023, he adds.

Citing market insights and strategic business intelligence firm IoT Analytics, Yeo highlights that there will likely be more than 29 billion IoT connections by 2027. The number of global IoT connections has already grown by 18% in 2022 to 14.3 billion active IoT endpoints.

“IoT Analytics expects the global number of connected IoT devices to grow by another 16% to 16.7 billion active endpoints in 2023. Growth for Aztech will be driven by new products and customers, especially in the IoT segment.

“These include smart LED lighting products for the Singapore government’s Housing and Development Board’s (HDB) Build-to-Order public housing projects, and the pre-school and educational segment for its IP CCTV products,” notes Yeo.

As at 2.17pm, shares in Aztech Global are trading 0.5 cent higher or 0.56% up at 88.5 cents.

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