KUALA LUMPUR (Dec 4): MTAG Group Bhd rose 4.55% in active trade in the morning session today after Affin Hwang Capital Research initiated coverage on the stock at 55 sen with a target price (TP) of 75 sen and based on a 13x FY21E PER.
At 12.30pm, MTAG was up 2.5 sen to 57.5 sen with 23.17 million shares traded.
In a note today, the research house said it likes MTAG for the following:
- its position as a key label and sticker-printing supplier, and mesh-material converter for a global renowned household-appliance brand
- its strong barrier to entry via its technical expertise in niche printing and converting industry for the E&E industry in the last 23 years
- solid earnings growth — CAGR of 13% for FY19-22E, led by a targeted doubling of its existing capacity in the next three years
- the less labour-intensive nature of its business, and
- attractive valuation of 10x FY21E PER and above average ROE of 22%.
"We expect MTAG's growth to be supported by its indirect key customer's new product introductions and application of higher-end materials, riding on the latter's ambitious plans, aggressive R&D roadmap, innovation and growth prospects.
"Currently trading at only 10x FY21E PER, we believe valuation looks appealing given its solid fundamentals, relatively high margin vs. its peers, low labour intensity requirements and high stock liquidity," it said.