KUALA LUMPUR (May 7): Shares of ECS ICT Bhd rose 4.91% in the morning session today after Maybank IB Research forecast a 10% 3-year FY14-17EPS CAGR for the company on the back of a 5% per annum revenue growth and a slight expansion in blended profit margins on new mobility products (smartdevices) offerings and recovery in Enterprise Systems distribution.

At 12.30pm, ECS (Fundamental: 2; Valuation: 2.40) gained 8 sen to RM1.71 with 901,800 shares traded.

Maybank IB, which has a fair value of RM2 on ECS ICT but no rating on the stock, said that ECS was a beneficiary of ICT spending in the country, which International Data Corporation (IDC) expects to be sustained well above the US$10 billion mark this year, driven by increasing hardware and software sales and ICT-related services.

In a note today, Maybank IB said IDC also expects smartphone sales to grow by 8% to US$2.4 billion in 2015.

“What is positive also is that ECS is in talks with several other global smartdevice (ie smartphones, tablets and wearables) brandowners to further expand its smart devices portfolio.

“Valuations are undemanding with the stock trading at an historical FY14PER of 10x versus a peer average of 13.6x,” he said.

The research house said that in fact, on stripping out ECS’s net cash of 50 sen per share, valuations are even more attractive at an FY15 PER of just 6.3x on an ex-cash basis.

“Our RM2 fair value (+23% upside) pegs ECS’ valuations to a CY15 PER of 11.3x, a 25% discount to that of the Bursa Malaysia Technology Index,” it said.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)