Analysts value Main Market-bound CPE Technology between RM1.25-RM1.27

TheEdge Fri, Nov 24, 2023 09:03am - 3 months View Original

KUALA LUMPUR (Nov 24): Research analysts have valued Main Market-bound engineering precision parts manufacturer CPE Technology Bhd between RM1.25 and RM1.27.

Apex Securities Bhd recommended investors “subscribe” to CPE Technology Bhd at RM1.07, with a target price of RM1.25.

In a note on Friday, the research house said Main Market-bound CPE Technology was valued by pegging its FY2024F core earnings per share (EPS) of 5.4 sen to a price-to-earnings (PE) ratio of 23.0x, leading to a fair value of RM1.25 (16.8% potential upside from its IPO price).

Apex said CPE Technology demonstrated an impressive track record with a core net profit of RM15.2 million in FY2022 (2Y CAGR +34.64%).

It explained that the said improvement was primarily attributed to the strong utilisation of Plants 1 and 2 for production activities.

Concurrently, the majority of industry segments served by the group experienced significant sales growth, driven by the economic recovery in 2021 and 2022, as well as high demand and improved average selling prices, particularly for semiconductors.

“Moving forward, we anticipate a continuous improvement in core net profit, projected at 9.9% y-o-y increase to hit RM33.3 million in FY24F. Growth is attributed to the expansion of their plant and additions of machineries.

“Going into FY25F, we expect CPE Technology’s sales of goods and rendering of services to record RM159.6 million and RM16.0 million respectively, bringing total revenue to RM175.5 million.

“Projected growth is supported by (i) the establishment of a new plant, (ii) the acquisition of new machinery and equipment to boost production capacity and expand service offerings and (iii) progressive drawdown of ample raw materials,” Apex said.

Meanwhile, PublicInvest Research derived a fair value of RM1.27, based on a PE ratio of 24x to its FY2025F EPS of 5.3sen.

The research house said CPE Technology intends to construct two new plants, each comprising a double-storey office building and a double-storey factory building in Taman Perindustrian Gemilang, Johor.

“Besides that, CPE Technology intends to purchase new machinery and equipment in order to increase its production capacity and service offerings to its customers,” it said.

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