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Wednesday, June 6, 2018

Mi Equipment Holdings Bhd - Staging A Growth Trajectory

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Mi Equipment Holdings Bhd (Mi Equipment) is principally involved in the in-house design, development, manufacture and sale of wafer level chip scale packaging (WLCSP) sorting machines with inspection and testing capabilities that meet the requirements of both local and international customers. The group also provides maintenance services and technical support for these machines, as well as the sale of related spare parts and components. Its principal markets are Malaysia, Southeast Asia, Northeast Asia and North Atlantic, having both integrated device manufacturers (IDMs) and outsourced semiconductor assembly and test companies (OSATs) as the group’s main customers.
Apart from securing a broader customer base, Mi Equipment intends to introduce assembly and packaging machines with new applications besides its flagship WLCSP sorting machines via continuous research and development to broaden its product portfolio. We derive a fair value of RM1.66 based on a 10.5x PE multiple to its FY2019F EPS of 15.8 sen. The IPO is expected to raise approximately RM190.9m from the issuance of 134.4m new shares. 73.4% of the proceeds will be utilised for business expansion through the construction of new factory cum office in Bayan Lepas and Batu Kawan, in order to boost the overall production capacity, accommodate new operation and ensure business continuity that are earmarked for long term future growth.
  • Growth drivers. Mi Equipment’s growth will be focused on i) introduction of new assembly and packaging machines into product line-up, ii) relocation of existing operations to new factory cum office in Bayan Lepas, iii) growing the new division of manufacturing of precision fabricated parts, and iv) setup of new factory cum office in Batu Kawan.
  • Competitive strengths. Mi Equipment’s competitive strengths include: i) engineering and technical expertise for products development, ii) offering of efficient and reliable sales and technical support to customers, iii) ability to secure and retain global customers, and iv) experienced and technically strong key senior management team.
  • Catalysts. Key drivers may include: i) growth in the demand for mobile electronics, ii) technological advantage of evolved wafer-level packaging, iii) increased outsourcing activities to engineering support companies, iv) increased relocation of manufacturing activities to countries with lower cost, and v) government support and initiatives to spur electronics and related industries.
  • Key risks. Key downside risks, among others, include i) competition and uncertainties in the electronics industry, ii) insufficient orders to maximise monthly production capacity, iii) fluctuations in foreign exchange rate, and iv) maintenance of the granted pioneer status.
Source: PublicInvest Research - 6 Jun 2018

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