Friday 29 Mar 2024
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SINGAPORE (Jan 20): Avi-Tech Electronics has had a remarkable turnaround since the three consecutive years of losses that landed the group in the Singapore Exchange’s watchlist in September 2014.

Since then, the burn-in board manufacturer and printed circuit board assembly services provider has divested its loss-making US businesses and had two consecutive years of earnings to successfully exit the watchlist on September 2016.

In an unrated note on Thursday, CIMB’s analyst William Tng pointed out that the group no longer has any financial impact from the divested US businesses and had also resumed its dividend payouts after returning to profitability.

Avi-Tech’s management admitted that the group remains vulnerable to the USD foreign exchange fluctuations as 85% of its sales and 60% to 65% of its material costs are in USD terms, and is also reliant on a small number of large customers the top two of whom contribute more than 40% to the group’s revenue.

However, they also added that the group could benefit from the increased use of sensors in vehicles as these fail-safe electronic components would require burn-in services that the group provides. At the same time, the boom in the Internet of Things would also boost the group’s burn-in, board design and manufacturing services.

To be sure, the group remains cash rich. With minimal capital expenditure needs, the group had net cash of S$30.2 million at end September, or 56% of its market value. Avi-Tech’s management has also committed to continue paying dividends as long as it remains in the black.

Armed with its cash hoard, Avi-Tech is also said to be on the lookout for acquisition opportunities, though the group added that it has “learnt from its previous experience” and will seek companies in a similar industry, with an established operation, and with a “profitable and non-R&D intensive business”.

Shares in Avi-Tech are trading at 31 Singapore cents.

 

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