| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The outlook for a key semiconductor player appears increasingly positive, driven by strong order book replenishment and growing recognition from critical front-end (FE) customers. Despite some tempered utilization in specific back-end (BE) segments, the robust demand for semiconductor-related services underpins a maintained “BUY” recommendation from analysts.
Performance Review and Growth Drivers
The company’s front-end semiconductor segment is a primary growth engine, supported by significant customer recognition and a healthy order book. FE semiconductors now constitute 35% of the current RM180 million order book, up from RM160 million in the previous quarter, with the largest FE customer contributing approximately 30% of the total. The remaining order book is diversified, comprising 48% BE semiconductors, 14% life science, and 2% other categories.
Operational efficiency remains a focus, with overall utilisation at 70%, and the FE semiconductor segment operating at approximately 80%. Management plans to commission additional machinery and has committed to an RM80 million capital expenditure for FY26—RM30 million for machinery and RM50 million for land acquisition—to support anticipated volume growth from a key European customer.
The back-end semiconductor segment also demonstrates strong visibility, primarily anchored by a significant BE customer. Tester shipments are set to increase from 10 units per week in 4QFY25 to an expected 15 units per week next month, with a commitment of 20 units per week from 2026 onwards, backed by a penalty clause for any shortfalls. This provides substantial order visibility and downside protection.
Challenges and Future Prospects
While the overall picture is strong, the company faces some challenges, including a weaker performance from its second BE customer, operating at approximately 30% utilisation. Additionally, the life science and other segments have largely maintained slower organic growth, and a newly onboarded customer is not expected to contribute meaningfully in the next 12 months.
Analysts maintain a “BUY” rating with an unchanged 12-month Target Price of RM3.70. The positive sentiment is based on expectations of continued share price re-rating driven by potential positive earnings surprises. Key downside risks highlighted include weaker-than-expected demand, a sharp appreciation of the Malaysian Ringgit, and weaker-than-expected margins.
