Memtech Intl   

Memtech - Good company to hold long term

Back to 1.66. Otw to recovery to 1.80 and beyond. dyodd

 

Lim & Tan also has some comment on Memtech today:
 
With around half of its turnover being generated from its Automotive segment and with Tesla being a relatively new and fast growing customer, Memtech International ($1.045, up 0.01) is poised to benefit from the booming electric car industry with the Chinese government promoting new energy vehicles (cars that are either partially or fully electric) as part of a new industrial policy known as Made in China 2025.
 
As Memtech supplies higher-margined functional plastic components for Tesla&rsquo s battery unit, we thus believe that Memtech is well-poised to benefit from the expanding electric vehicle market. Furthermore, we understand that Memtech was recently awarded a global platform project from Continental (Ford).
 
With the launch of the Model 3 (Tesla&rsquo s new mass market electric vehicle), CEO Elon Musk is now more confident of the demand for the vehicle, seeing annual demand exceed 700,000 units (from previous 500,000/year). As a point of reference, the cumulative number of Model 3 reservations currently checks in at more than 500,000. Tesla is hoping to manufacture 20,000 Model 3 units per month by the end of 2017 while wan􀆟 ng to boost monthly Model 3 production to 40,000 units in 2018.
 
Going forward, according to the International Energy Agency, assessments of country targets, original equipment manufacturer (OEM) announcements and scenarios on electric car deployment seem to be positive, indicating a good chance that the electric car stock will range between 9mln and 20mln by 2020 and between 40mln and 70mln by 2025. Assuming the lower end of the forecast of 9mln for 2020, this still represents a phenomenal CAGR of 45% for electric vehicles as compared to the 2mln vehicles produced in 2016.
 
Meanwhile, Memtech' s Consumer Electronics business division, the headphones/earphones market continues to enjoy good growth prospects in both the United States and China markets while the Group&rsquo s continued expansion into these acoustic-related products such as the Beats and Bose brands bodes well for its 2H17 outlook.
 
Also taking into account the broader global technology sector where it is showing no signs of slowing down as evidenced by the recent semiconductor sales statistics, we thus opine that Memtech would be able to record a stronger 2H17 over both 2H16 and 1H17 in terms of operating profit.
 
Moreover, the valuations of Memtech are attractive as compared to its peers where it trades at 10.7x P/E and 0.9x P/B while the peer average is priced at 15.1x P/E and 2.0x P/B. The last two takeover candidates, Fischer Tech and Chosen Hldgs, also suggests that Memtech is cheap with their average take-out P/E of 15.0x and P/B of 1.3x.
 
Based on the Memtech' s dividend payout policy of 30%, normalised dividend (excluding the one-time gain of around US$3mln) would translate to S$0.029 per share. If we assume that Memtech pays out 30% of its extraordinary gain of US$3mln, this would translate to an additional S$0.01, giving a total dividend of S$0.039 for FY17.
 
Dividend yield would thus equate to 3.8%, which is more attractive than the peer average of 3.1%. Finally, Memtech' s financial position is robust with net cash position of S$36.4mln accounting for about 25.0% of its current market cap, puttng them in a strong position to handle higher interest rates going forward.
 
Taking a 10% valuation discount to its peer average of 15.1x P/E for Memtech' s smaller market capitalisation, we derive a target price of S$1.30. We thus maintain our BUY recommendation and expect Memtech to play catch up with its peers such as Hi-P and Sunningdale Tech, given that it is the only one that is still trading below its book value of S$1.12/share.

 

FROM THE REGIONAL MORNING NOTES...
Memtech International
(MTEC SP/BUY/S$1.045/Target: S$1.33)
China&rsquo s factories grew at the fastest pace in five years. China&rsquo s factories cranked up
output in Sep 17 to take advantage of strong demand and high prices with the official
PMI at 52.4, the highest reading for manufacturing activity since Apr 12. The private
Caixin PMI came in at a lower 51.0, but still indicates an overall expansion in
manufacturing activity.
EVs to take centrestage as China looks to phase out sales of fossil fuel cars. Following
similar announcements in France, UK and India, China announced on 9 Sep 17 that
they will set a deadline for automakers to end the sale of fossil fuel-powered vehicles.
This will accelerate the push into the Electric Vehicle (EV) market, led by companies like
BYD Co (whose stock price surged 40% in the month of Sep 17). We believe this will
open more opportunities for downstream manufacturers of EVs like Memtech.
Memtech to benefit tremendously from Tesla&rsquo s production surge. In 2016, Tesla
manufactured and delivered 76,000 vehicles. Going forward, we believe this number will
surge tremendously as Tesla enters the mass market segment. We understand that
Memtech is responsible for functional plastic components related to Tesla&rsquo s core
batteries and even before 2H17, we note that Tesla was already Memtech&rsquo s 8th largest
customer. We believe with the production ramp-up of Model 3, Memtech&rsquo s 2H17 results
will jump further.
The Beats are on track. Memtech provides a number of parts for the popular Beats
ear/headphones (according to the NPD Group&rsquo s Retail Tracking Service, Beats took 46
US cents of every dollar spent on wireless headphones in the US). Going forward,
Gartner forecasts sales of wireless Bluetooth headsets to grow from 128.5m in 2016 to
150m in 2017, before rising to 206m by 2021. On the other end, Memtech has multiple
ongoing projects with Apple but none are in mass production yet.
Memtech once again lagging behind peers. With Memtech&rsquo s peers such as Hi-P
International and Sunningdale Tech guiding for stronger 2H17 results, we remain
confident on the company&rsquo s prospects going into 2H17. The market has significantly
underappreciated Memtech&rsquo s prospects as it trades at only 9.1x 2018F PE vs peers&rsquo
11.6x 2018F PE. Memtech&rsquo s net cash position equivalent to approximately 26% of its
market capitalization (US$29m) is by far the highest when compared to that of peers
such as Hi-P International (11%) and Sunningdale Tech (2%).
Maintain BUY with a higher PE-based target price of S$1.33 (previously S$1.18) as
peers have undergone another round of re-rating. Thus, we peg our valuation to peers&rsquo
average 2018F PE of 11.6x (previously 10.3x). Memtech is currently one of the few
precision engineering companies trading below book at only 0.9x 2017F P/B.

 

sold mine.....waiting for a better price to enter.

 

Why the continuous sell down?

 

memtech' s investors seem to be easily frightened. the sell down is just too much

 

headline numbers look good but when you strip out the $3.1m one-off gain from sale of their Huzhou land and factory, it is relatively flat QoQ though a stark improvement from 2Q16. turnaround with core PATMI of $1.7m for 2Q17, reversal of $1.4m loss in 2Q16.

 

http://infopub.sgx.com/FileOpen/Memtech%202017%20Q2.ashx?App=Announcement& FileID=466377
looks good

 

time to fly soon...

 

quietly itching up.......stay tuned

 

$1 is good price to sell.
I am still holding on Memtech.   Top up Sunsine too. 

 

Sold! Thanks Memtech. Immediately recycled fund to china sunsine.

 

indeed.....

 

Buy in dips

 

haha too late liao lah, u need to load up when it low around 60c. I only managed to get 100 lots of around 63c before it ran up

 

among the manufacturers, only few stocks left that are profitable/turnaround and still trading under book value. Memtech is one of those and poised favourably in a turnaround position. was hoping to catch it below 90c but seems to be on its rebound trajectory today.

 

just tech stock jitters from Nasdaq.

BUT

The main problem for all manufacturing co now is China Caixin PMI gone negative again for May reading. This means slowdown in China , which means next quarter report for these co. will be bad and below expectation (lagging effect)

Singapore manufacturing still positive growth last reading but is a big slowdown also in growth from last year numbers.

Waiting go back to 60c can hoot again, after all boss recently hoot at 85c or 92c i think.

 

actually, memtech' s valuation is still quite cheap, dont know why is it getting affected by the ums selldown. UMS' s valuation is much more expensive than memtech' s

 

Laggard lah, other tech stock start to move again but this still consolidating.

 

why this laggard still lagging?