| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading semiconductor solutions provider is anticipated to enter a period of strong earnings growth from FY26F, following a notable rebound in its third-quarter (3Q25) core earnings. Despite a challenging year-to-date performance in 9MFY25, the company’s strategic positioning in high-growth segments and a robust order pipeline are expected to drive significant acceleration in the coming years.
Performance Review and Future Outlook
In 3Q25, the company reported a substantial surge in core earnings, increasing by 73% year-on-year and 68% quarter-on-quarter to MYR1.6 million. This strong performance was primarily attributed to a favorable product mix skewed towards higher-margin offerings and enhanced operational efficiencies. However, the cumulative core earnings for the nine months ending September 2025 (9MFY25) declined to MYR65.2 million, largely due to a softer demand for high-value integrated SMT manufacturing line projects earlier in the year.
Looking ahead, the investment bank forecasts a clear earnings inflection point from FY26F, projecting accelerated growth through FY26F-27F. Management has guided for a 20-30% revenue growth in core businesses for FY26, underpinned by improving semiconductor industry conditions, a recovery in E&E capital expenditure, and sustained demand from AI- and EV-related applications.
Strategic Growth Drivers
The company’s positive outlook is strongly supported by an outstanding order book of MYR40 million, with a significant portion (30-40%) tied to secular growth markets such as AI-related supply chains and EV/power electronics. This order book provides substantial revenue visibility into FY26F-27F.
Further growth is expected from technology-led ODM/OEM (Original Design Manufacturer/Original Equipment Manufacturer) expansions. Key initiatives include the acquisition of Xlent Innovator, which facilitates entry into the AI-related supply chain, and new collaborations with renowned US and German equipment makers. These partnerships are developing advanced AI server modules and modular soldering systems, with initial contributions anticipated from 4Q25 and a projected acceleration in FY26F. Smart manufacturing solutions, particularly those leveraging AI-enabled software for workflow optimization and process automation, are also identified as crucial drivers, promising double-digit gross margins and significant efficiency gains.
The group has also strengthened its ASEAN footprint through the ITW Electronics Assembly Equipment (ITW EAE) acquisition, further supporting its growing order book and enabling it to capitalize on global supply-chain shifts.
Investment Recommendation
TA Securities maintains a “BUY” recommendation for the stock, with a target price (TP) set at RM0.25. This represents a 25.0% upside from the last traded price of RM0.20. The valuation is based on an attractive FY26F P/E multiple, reflecting the anticipated strong earnings rebound and strategic positioning in high-growth segments. Key downside risks include the timing of order recognition and fulfillment, potential failure to secure new projects, non-renewal of distributor agreements, stiff competition, margin compression, and foreign exchange fluctuations.
