SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<ul><li>Share buybacks by primary listed companies 12 - 18 May 2023 DBS, Genting Singapore, UOB, CapitaLand Investment and Thai Beverage led the net institutional outflow for the five sessions.</li><li>At S$0.044 per share, the acquisition took Lee’s total interest in Marco Polo Marine from 4.56 per cent to 4.57 per cent.</li><li>His preceding acquisition was back on Jan 12, with 5 million shares acquired at S$0.04 per share.</li></ul>

Share buybacks by primary listed companies 12 - 18 May 2023 DBS, Genting Singapore, UOB, CapitaLand Investment and Thai Beverage led the net institutional outflow for the five sessions.At S$0.044 per share, the acquisition took Lee’s total interest in Marco Polo Marine from 4.56 per cent to 4.57 per cent.His preceding acquisition was back on Jan 12, with 5 million shares acquired at S$0.04 per share.

Aztech Global executive chair adds to stake

<ul><li>The first six weeks of 3Q22 has seen the technology sector lead the global stock market, after ranking as the laggard sector in both 1Q22 and 2Q22.</li><li>Global technology stocks, in addition to e-commerce retailers make up approximately 25% of the FTSE Developed Index, with the slump in these industries in 1Q22 and 2Q22 driving the decline of the broader Developed economy benchmark through the end of June.</li><li>Together the seven stocks averaged 9% total returns over the six weeks, reducing their average decline in total return to 12%.</li></ul>

The first six weeks of 3Q22 has seen the technology sector lead the global stock market, after ranking as the laggard sector in both 1Q22 and 2Q22.Global technology stocks, in addition to e-commerce retailers make up approximately 25% of the FTSE Developed Index, with the slump in these industries in 1Q22 and 2Q22 driving the decline of the broader Developed economy benchmark through the end of June.Together the seven stocks averaged 9% total returns over the six weeks, reducing their average decline in total return to 12%.

Tech Sector Leads Global Stocks in 3Q22-to-date, AEM Beats & Raises

<figure class="editor-figure mceNonEditable"><img src="https://api2.sgx.com/sites/default/files/2021-10/Aztech-COO.jpg" class="editor-image img-responsive"></figure>
<div class="content-caption">Aztech COO</div>
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<p>For Jeremy Mun, an electronics industry veteran of over two decades, building a culture of inclusion, acceptance and support among employees in his organisation has always been the bedrock of his management philosophy.<br><br>“The one important value I caught from my father is treating employees as part of the family,” said the Executive Director and Chief Operating Officer of SGX-listed technology group Aztech Global Ltd. His father, Michael Mun, is Aztech Global’s Executive Chairman and Chief Executive Officer.<br><br>Putting this philosophy into practice, Mun believes in the principle of empowerment - building accountability and trust by giving employees a degree of autonomy and responsibility in their daily decision-making.<br><br>“This helps cultivate a sense of ownership and pride in their achievements. In short, I want everyone to experience a colourful and enriching career journey with the Aztech family,” he added.<br><br>Mun, who graduated with a Bachelor of Science in Management degree from the University of London in 2000, has been with the Aztech Group since 2002. Before he was appointed to the Board and his current role in 2017, Mun was involved in product development and sales of the Group’s LED lighting business. He was stationed in the Group’s Hong Kong and China offices for more than 10 years to oversee the operations in China.<br><br>“Watching first-hand how the company has transformed and evolved over all these years has been my highest privilege. The most exciting part is often witnessing the development of new products, and their increasing adoption and acceptance, leading to the creation of new markets,” he recalled.<br><br>“Being an early adopter of technology myself, I am thrilled whenever presented with new manufacturing technologies that we can leverage to unlock new growth opportunities and propel the Group forward.”<br><br>Aztech Global is the technology arm of Singapore-based conglomerate Aztech Group, which was established in 1986 and delisted from SGX in 2017. In March this year, Aztech Global made its debut on SGX Mainboard.<br><br>The Group is a key technology enabler for the connected world of tomorrow, with a focus on providing one-stop design and manufacturing services. Supported by its core strengths in research and development (R&amp;D), design, engineering and manufacturing, its key products are Internet of Things (IoT) devices, data communication products and LED lighting products.&nbsp;<br><br>Leveraging on its expertise, it also provides one-stop design and manufacturing services to clients that include blue-chip customers and technology start-ups.&nbsp;<br><br>Aztech Global has four R&amp;D centres in Singapore, Hong Kong and China, as well as three manufacturing facilities in Dongguan, China, and Johor, Malaysia. To-date, the Group has close to 3,000 employees worldwide.<br><br><strong>Transformation Journey</strong><br><br>“Our Mainboard listing in March is just the beginning of our transformed growth story,” Mun pointed out.<br><br>“Reimagining possibilities in the growing IoT and data communications space, as well as smart LED lighting where our core strengths lie, are focus areas that will take the Group to the next stage of growth.”<br><br>In particular, the Group’s Original Design Manufacturing (ODM) and Joint Development Manufacturing (JDM) businesses are expanding its smart devices for home and office applications, while its R&amp;D division has embarked on collaborative efforts with customers to tap on growth opportunities offered by the proliferation of IoT in the healthtech industry.&nbsp;<br><br>With the global shortage of components unlikely to abate in the foreseeable future, Aztech Global continues to work closely with its customers, suppliers, and relevant stakeholders to ensure smooth production and timely delivery of orders.&nbsp;<br><br>According to Frost &amp; Sullivan, the IoT industry is expected to continue expanding at a compound annual growth rate (CAGR) of 20.8% to reach US$425.2 billion by 2023 from 2019, while the data communication industry is forecast to grow at a CAGR of 5.9% from 2019 to US$59.0 billion in 2023.<br><br>Another important step in the Group’s future development is harnessing the power of data analytics, Mun added.&nbsp;<br><br>“I’m looking to automate the data collection process for the Group to achieve optimal decision-making prowess. With greater demand from customers for transparent and live information on their order processes, we're working with them to develop the platform that will allow for greater synergies and collaboration.”<br><br>Despite the disruptions and turbulence created by COVID-19, the pandemic has taught the Group a number of invaluable lessons.<br><br>“COVID-19 has shown us that we need to be always prepared for the worst-case scenario - it’s crucial to have procedures and policies in place even before a crisis strikes,” Mun noted.<br><br>“The pandemic is also one example where our empowered staff members are being put to the test to run operations independently.”<br><br><strong>Talent Challenge</strong><br><br>Nonetheless, the fluidity of the situation remains a concern for Mun.&nbsp;“With the new COVID-19 variants transmitting more quickly, my concern remains for our staff. We have put in place safety measures to protect them, and will continue our best to do so,” he said.<br><br>Other challenges that the Group grapples with include talent acquisition and retention. “Talent is always an issue in any fast-moving industry,” Mun acknowledged.&nbsp;<br><br>“Engineering skillsets are in high demand, not only in the electronics industry, but also in other sectors such as fintech. Creating the right environment for our staff to grow and contribute, as well as remodelling our HR practices, are some ways to recruit and retain key personnel.”<br><br>At the same time, Aztech Global remains focused on fine-tuning its Environmental, Social and Governance (ESG) strategy.<br><br>“ESG is one area we’re constantly working on. Right now, we are producing our first sustainability report. With the data collected, we’ll be able to set objectives with a view to achieving lower or carbon neutral targets and quality employment for our members in the Aztech family,” Mun said.<br><br>“As we are working with some of the biggest companies in the world, we do have policies and audits in place to ensure compliance with international standards.”<br><br>While work can be all-consuming for this 45-year-old, there’s never a dull moment. “What gets me going every day is the vision of a successful launch of our customer’s product - one that has been designed and manufactured by Aztech,” he said with a smile.<br><br>Nurturing the values of trust and integrity among employees and clients is also another priority. “These values are the cornerstone to building long and lasting relationships with colleagues and customers,” Mun added.<br><br>“I always tell my staff that there’s no right or wrong decision. I encourage them to make and take ownership of their decisions, so that together, we learn from our experiences to grow and do better each time.”<br><br><strong>Aztech Global Ltd</strong><br><br>Aztech Global is a key technology enabler for the connected world of tomorrow, with a focus on providing one-stop design and manufacturing services. Supported by its core strengths in R&amp;D, design, engineering and manufacturing, its key products are IoT devices, data-communication products and LED lighting products. Leveraging on this expertise, the Group also provides one-stop design and manufacturing services to blue-chip customers and technology start-ups. Headquartered in Singapore, the Group has four R&amp;D centres in Singapore, Hong Kong and China, namely in Shenzhen and Dongguan, and three manufacturing facilities in Dongguan, China and Johor, Malaysia. To-date, the Group has close to 3,000 employees worldwide.</p>
<p>The company website is: <a href="http://www.aztechglobal.com/" target="_blank" rel="noopener"><strong>www.aztechglobal.com</strong></a><br><br>Click&nbsp;<a href="https://www.sgx.com/securities/equities/8AZ" target="_blank" rel="noopener"><strong>here</strong>&nbsp;</a>for the company's StockFacts page.<br><br>For the three months ended 30 June 2021 financial results, click&nbsp;<a href="https://links.sgx.com/1.0.0/corporate-announcements/T2X3HF5DM3U3I0KP/676663_1H%202021%20Results%20Press%20Release.pdf" target="_blank" rel="noopener"><strong>here</strong></a>.<br><br>&nbsp;</p>
<p><strong>About&nbsp;kopi-C: the Company brew</strong></p>
<p><strong>Text: Jennifer Tan-Stanisic</strong><br><strong>Photo: Company file</strong><br><br><em>kopi-C&nbsp;</em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>For previous editions of&nbsp;<em>kopi-C: the Company brew,</em>&nbsp;please click&nbsp;<a href="https://www.sgx.com/research-education/market-dialogues" target="_blank" rel="noopener">here</a>. &nbsp;<br><br>For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;<a href="https://www.sgx.com/jennifer.t@sgx.com" target="_blank" rel="noopener">jennifer.t@sgx.com</a>.</p>


Aztech COO

For Jeremy Mun, an electronics industry veteran of over two decades, building a culture of inclusion, acceptance and support among employees in his organisation has always been the bedrock of his management philosophy.  “The one important value I caught from my father is treating employees as part of the family,” said the Executive Director and Chief Operating Officer of SGX-listed technology group Aztech Global Ltd. His father, Michael Mun, is Aztech Global’s Executive Chairman and Chief Executive Officer.  Putting this philosophy into practice, Mun believes in the principle of empowerment - building accountability and trust by giving employees a degree of autonomy and responsibility in their daily decision-making.  “This helps cultivate a sense of ownership and pride in their achievements. In short, I want everyone to experience a colourful and enriching career journey with the Aztech family,” he added.  Mun, who graduated with a Bachelor of Science in Management degree from the University of London in 2000, has been with the Aztech Group since 2002. Before he was appointed to the Board and his current role in 2017, Mun was involved in product development and sales of the Group’s LED lighting business. He was stationed in the Group’s Hong Kong and China offices for more than 10 years to oversee the operations in China.  “Watching first-hand how the company has transformed and evolved over all these years has been my highest privilege. The most exciting part is often witnessing the development of new products, and their increasing adoption and acceptance, leading to the creation of new markets,” he recalled.  “Being an early adopter of technology myself, I am thrilled whenever presented with new manufacturing technologies that we can leverage to unlock new growth opportunities and propel the Group forward.”  Aztech Global is the technology arm of Singapore-based conglomerate Aztech Group, which was established in 1986 and delisted from SGX in 2017. In March this year, Aztech Global made its debut on SGX Mainboard.  The Group is a key technology enabler for the connected world of tomorrow, with a focus on providing one-stop design and manufacturing services. Supported by its core strengths in research and development (R&amp;D), design, engineering and manufacturing, its key products are Internet of Things (IoT) devices, data communication products and LED lighting products.&nbsp;  Leveraging on its expertise, it also provides one-stop design and manufacturing services to clients that include blue-chip customers and technology start-ups.&nbsp;  Aztech Global has four R&amp;D centres in Singapore, Hong Kong and China, as well as three manufacturing facilities in Dongguan, China, and Johor, Malaysia. To-date, the Group has close to 3,000 employees worldwide.  Transformation Journey  “Our Mainboard listing in March is just the beginning of our transformed growth story,” Mun pointed out.  “Reimagining possibilities in the growing IoT and data communications space, as well as smart LED lighting where our core strengths lie, are focus areas that will take the Group to the next stage of growth.”  In particular, the Group’s Original Design Manufacturing (ODM) and Joint Development Manufacturing (JDM) businesses are expanding its smart devices for home and office applications, while its R&amp;D division has embarked on collaborative efforts with customers to tap on growth opportunities offered by the proliferation of IoT in the healthtech industry.&nbsp;  With the global shortage of components unlikely to abate in the foreseeable future, Aztech Global continues to work closely with its customers, suppliers, and relevant stakeholders to ensure smooth production and timely delivery of orders.&nbsp;  According to Frost &amp; Sullivan, the IoT industry is expected to continue expanding at a compound annual growth rate (CAGR) of 20.8% to reach US$425.2 billion by 2023 from 2019, while the data communication industry is forecast to grow at a CAGR of 5.9% from 2019 to US$59.0 billion in 2023.  Another important step in the Group’s future development is harnessing the power of data analytics, Mun added.&nbsp;  “I’m looking to automate the data collection process for the Group to achieve optimal decision-making prowess. With greater demand from customers for transparent and live information on their order processes, we're working with them to develop the platform that will allow for greater synergies and collaboration.”  Despite the disruptions and turbulence created by COVID-19, the pandemic has taught the Group a number of invaluable lessons.  “COVID-19 has shown us that we need to be always prepared for the worst-case scenario - it’s crucial to have procedures and policies in place even before a crisis strikes,” Mun noted.  “The pandemic is also one example where our empowered staff members are being put to the test to run operations independently.”  Talent Challenge  Nonetheless, the fluidity of the situation remains a concern for Mun.&nbsp;“With the new COVID-19 variants transmitting more quickly, my concern remains for our staff. We have put in place safety measures to protect them, and will continue our best to do so,” he said.  Other challenges that the Group grapples with include talent acquisition and retention. “Talent is always an issue in any fast-moving industry,” Mun acknowledged.&nbsp;  “Engineering skillsets are in high demand, not only in the electronics industry, but also in other sectors such as fintech. Creating the right environment for our staff to grow and contribute, as well as remodelling our HR practices, are some ways to recruit and retain key personnel.”  At the same time, Aztech Global remains focused on fine-tuning its Environmental, Social and Governance (ESG) strategy.  “ESG is one area we’re constantly working on. Right now, we are producing our first sustainability report. With the data collected, we’ll be able to set objectives with a view to achieving lower or carbon neutral targets and quality employment for our members in the Aztech family,” Mun said.  “As we are working with some of the biggest companies in the world, we do have policies and audits in place to ensure compliance with international standards.”  While work can be all-consuming for this 45-year-old, there’s never a dull moment. “What gets me going every day is the vision of a successful launch of our customer’s product - one that has been designed and manufactured by Aztech,” he said with a smile.  Nurturing the values of trust and integrity among employees and clients is also another priority. “These values are the cornerstone to building long and lasting relationships with colleagues and customers,” Mun added.  “I always tell my staff that there’s no right or wrong decision. I encourage them to make and take ownership of their decisions, so that together, we learn from our experiences to grow and do better each time.”  Aztech Global Ltd  Aztech Global is a key technology enabler for the connected world of tomorrow, with a focus on providing one-stop design and manufacturing services. Supported by its core strengths in R&amp;D, design, engineering and manufacturing, its key products are IoT devices, data-communication products and LED lighting products. Leveraging on this expertise, the Group also provides one-stop design and manufacturing services to blue-chip customers and technology start-ups. Headquartered in Singapore, the Group has four R&amp;D centres in Singapore, Hong Kong and China, namely in Shenzhen and Dongguan, and three manufacturing facilities in Dongguan, China and Johor, Malaysia. To-date, the Group has close to 3,000 employees worldwide.
The company website is: www.aztechglobal.com  Click&nbsp;here&nbsp;for the company's StockFacts page.  For the three months ended 30 June 2021 financial results, click&nbsp;here.  &nbsp;
About&nbsp;kopi-C: the Company brew
Text: Jennifer Tan-Stanisic Photo: Company file  kopi-C&nbsp;is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  For previous editions of&nbsp;kopi-C: the Company brew,&nbsp;please click&nbsp;here. &nbsp;  For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;jennifer.t@sgx.com.

Aztech Global: Enabling Technologies for a Connected Future

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>Aztech Global Ltd</h2>
<h3>All eyes will be on execution in FY21F</h3>
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<li>AZTECH registered strong order book growth of 24% from 1Q21 to reach S$604.4m as of end-Jul 21 and aims to maintain profit margin in 2H21F.</li>
<li>We estimate a bull-case scenario of S$704m(+45.4% yoy) for FY21F revenue if AZTECH can obtain sufficient components given the current shortage.</li>
<li>Reiterate Add with TP of S$1.82 based on lower 15x FY22F P/E to reflect component shortage and Covid-19 risks.</li>
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<p><strong>1H21 results in line; registered strong order book growth</strong><br>AZTECH’s 1H21 revenue/PATMI of S$249.7m/S$29.4m (+93.4% yoy/+125.9% yoy) was in line, forming c.40% of our full-year forecast (AZTECH has a 40:60 seasonality). The strong growth was mainly driven by its IoT and data communication segment which delivered 128.7% yoy revenue growth to S$232.6m. NPM expanded to 11.8% (+1.7% pts yoy), helped by 1) strong demand for its IoT and data communication products which commanded higher margins, 2) better operating costs controls and 3) tax incentives for its China operations. Order book growth continued to gain strong traction, registering 24% growth from 1Q21 to S$604.4m as of end-Jul 21.</p>
<p><strong>Demand still strong; execution will be key in 2H21F</strong><br>Our key takeaways post earnings call are 1) Customer A accounted for c.65% of revenue in 1H21 and AZTECH is on track to deliver its orders of c.12m smart security cameras for FY21F, 2) demand for Customer A’s smart security cameras continue to outpace supply, 3) component shortages continue to persist which caused some drag in production in 1H21 and management expects the situation to continue until 2H22F, 4) pandemic and supply chain-related risks will continue to be headwinds in 2H21F and 5) AZTECH hopes to maintain profit margin in 2H21F. Going into 2H21F, AZTECH continues to see strong demand for its products but getting components remains a challenge. In our view, AZTECH’s 2H21F performance hinges on its ability to secure enough components to fulfill customers’ orders.</p>
<p><strong>Our bull-case scenario sees FY21F revenue at S$704m</strong><br>Our checks on 30 Jul 21 found that AZTECH’s cameras continue to rank in the top 10 Best Sellers list for surveillance and security cameras on Amazon.com in the US. We maintain our FY21F revenue of S$625.9m, assuming a 40:60 seasonality. Out of the S$604.4m outstanding order book, AZTECH expects S$454.4m to be completed in FY21F. With 1H21 revenue of S$249.7m, FY21F revenue upside could be c.S$704m (+45.4% yoy) if AZTECH can secure enough components to fulfill orders.</p>
<p><strong>Reiterate Add, with a lower TP of S$1.82</strong><br>We tweak up FY21F-23F EPS by 1.5% to factor in lower tax rate assumptions. We lower our TP to S$1.82 as we remain cautious, with a lower P/E of 15x FY22F EPS (Singapore technology sector average) to account for operational risks from component shortages and Covid-19 related supply chain disruptions. Upside risk is new customer wins.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




Aztech Global Ltd
All eyes will be on execution in FY21F





AZTECH registered strong order book growth of 24% from 1Q21 to reach S$604.4m as of end-Jul 21 and aims to maintain profit margin in 2H21F.
We estimate a bull-case scenario of S$704m(+45.4% yoy) for FY21F revenue if AZTECH can obtain sufficient components given the current shortage.
Reiterate Add with TP of S$1.82 based on lower 15x FY22F P/E to reflect component shortage and Covid-19 risks.





1H21 results in line; registered strong order book growth AZTECH’s 1H21 revenue/PATMI of S$249.7m/S$29.4m (+93.4% yoy/+125.9% yoy) was in line, forming c.40% of our full-year forecast (AZTECH has a 40:60 seasonality). The strong growth was mainly driven by its IoT and data communication segment which delivered 128.7% yoy revenue growth to S$232.6m. NPM expanded to 11.8% (+1.7% pts yoy), helped by 1) strong demand for its IoT and data communication products which commanded higher margins, 2) better operating costs controls and 3) tax incentives for its China operations. Order book growth continued to gain strong traction, registering 24% growth from 1Q21 to S$604.4m as of end-Jul 21.
Demand still strong; execution will be key in 2H21F Our key takeaways post earnings call are 1) Customer A accounted for c.65% of revenue in 1H21 and AZTECH is on track to deliver its orders of c.12m smart security cameras for FY21F, 2) demand for Customer A’s smart security cameras continue to outpace supply, 3) component shortages continue to persist which caused some drag in production in 1H21 and management expects the situation to continue until 2H22F, 4) pandemic and supply chain-related risks will continue to be headwinds in 2H21F and 5) AZTECH hopes to maintain profit margin in 2H21F. Going into 2H21F, AZTECH continues to see strong demand for its products but getting components remains a challenge. In our view, AZTECH’s 2H21F performance hinges on its ability to secure enough components to fulfill customers’ orders.
Our bull-case scenario sees FY21F revenue at S$704m Our checks on 30 Jul 21 found that AZTECH’s cameras continue to rank in the top 10 Best Sellers list for surveillance and security cameras on Amazon.com in the US. We maintain our FY21F revenue of S$625.9m, assuming a 40:60 seasonality. Out of the S$604.4m outstanding order book, AZTECH expects S$454.4m to be completed in FY21F. With 1H21 revenue of S$249.7m, FY21F revenue upside could be c.S$704m (+45.4% yoy) if AZTECH can secure enough components to fulfill orders.
Reiterate Add, with a lower TP of S$1.82 We tweak up FY21F-23F EPS by 1.5% to factor in lower tax rate assumptions. We lower our TP to S$1.82 as we remain cautious, with a lower P/E of 15x FY22F EPS (Singapore technology sector average) to account for operational risks from component shortages and Covid-19 related supply chain disruptions. Upside risk is new customer wins.













(Non-SGX Report) Aztech Global Ltd: All Eyes Will Be on Execution in FY21F

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>Aztech Global Ltd</h2>
<h3>Abiding by its growth story</h3>
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<li>Strong order book for FY21F and winning more wallet share from CustomerA. AZTECH is preparing to ramp up production in 2H21F.</li>
<li>We believe AZTECH will be able to achieve FY21F net margin of 11.6%, backed by strong demand and its ability to manage supply chain risks.</li>
<li>Reiterate Add with unchanged TP of S$1.91, still pegged to 16x FY22F EPS, supported by capacity expansion and a robust order book.</li>
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<p><strong>Growing order book and preparing for production ramp-up</strong><br>We met management and our key takeaways are 1) AZTECH’s order book visibility remains robust for FY21F; 2) it gained more wallet share from key Customer A with production expected to begin in 3Q21F; 3) the company expects a strong 2H21F and is in the midst of preparing for a production ramp-up; and 4) while supply chains are tight, AZTECH is managing the situation well due to its good relationships with its suppliers and strong bargaining power with its key customers. In view of tight supply chains, we believe AZTECH will have order book visibility up till 1H22F as its customers are placing orders ahead. We keep our FY21F net margin assumption of 11.6%, as AZTECH has the ability to source the required components and pass on rising raw material costs to its customers.</p>
<p><strong>Smart security cameras on Amazon’s top 10 “Best Sellers” list</strong><br>AZTECH is the sole manufacturer of Customer A’s smart security cameras which are sold mainly in North America. Our checks on 25 Jun 2021 found AZTECH’s manufactured cameras appearing seven times in the top 10 “Best Sellers in Surveillance &amp; Security Cameras” category on Amazon.com in the US. We see this as a good proxy to gauge the demand from end-customers and order flow from Customer A. We continue to expect strong demand for its smart security cameras and new wallet share gains from Customer A to drive earnings growth through FY21F-23F.</p>
<p><strong>Covid-19 update: factories still running, vaccinations ongoing</strong><br>China recently launched a mass Covid-19 testing programme after detecting two cases of the Delta variant in Dongguan, according to the Business Times. AZTECH’s factory in the sub-district of Changping in Dongguan currently accounts for 80% of its production capacity. We understand from management that impact to production has been limited to date, and that 70% of its factory workers there have been vaccinated; full vaccination could be completed by Jul 2021. Management also expects minimal disruptions to its production in Malaysia due to the movement controls there.</p>
<p><strong>Reiterate Add with an unchanged TP of S$1.91</strong><br>We keep our Add call on AZTECH with an unchanged TP of S$1.91, still based on c.16x FY22F EPS, a premium to Singapore technology sector average, given its high ROE supported by capacity expansion and robust order book providing strong net profit growth potential of c.18% CAGR over FY20F-23F, in our view. New customer wins could re-rate the stock. Key downside risks: execution risks from Covid-19 disruptions.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.






Aztech Global Ltd
Abiding by its growth story





Strong order book for FY21F and winning more wallet share from CustomerA. AZTECH is preparing to ramp up production in 2H21F.
We believe AZTECH will be able to achieve FY21F net margin of 11.6%, backed by strong demand and its ability to manage supply chain risks.
Reiterate Add with unchanged TP of S$1.91, still pegged to 16x FY22F EPS, supported by capacity expansion and a robust order book.





Growing order book and preparing for production ramp-up We met management and our key takeaways are 1) AZTECH’s order book visibility remains robust for FY21F; 2) it gained more wallet share from key Customer A with production expected to begin in 3Q21F; 3) the company expects a strong 2H21F and is in the midst of preparing for a production ramp-up; and 4) while supply chains are tight, AZTECH is managing the situation well due to its good relationships with its suppliers and strong bargaining power with its key customers. In view of tight supply chains, we believe AZTECH will have order book visibility up till 1H22F as its customers are placing orders ahead. We keep our FY21F net margin assumption of 11.6%, as AZTECH has the ability to source the required components and pass on rising raw material costs to its customers.
Smart security cameras on Amazon’s top 10 “Best Sellers” list AZTECH is the sole manufacturer of Customer A’s smart security cameras which are sold mainly in North America. Our checks on 25 Jun 2021 found AZTECH’s manufactured cameras appearing seven times in the top 10 “Best Sellers in Surveillance &amp; Security Cameras” category on Amazon.com in the US. We see this as a good proxy to gauge the demand from end-customers and order flow from Customer A. We continue to expect strong demand for its smart security cameras and new wallet share gains from Customer A to drive earnings growth through FY21F-23F.
Covid-19 update: factories still running, vaccinations ongoing China recently launched a mass Covid-19 testing programme after detecting two cases of the Delta variant in Dongguan, according to the Business Times. AZTECH’s factory in the sub-district of Changping in Dongguan currently accounts for 80% of its production capacity. We understand from management that impact to production has been limited to date, and that 70% of its factory workers there have been vaccinated; full vaccination could be completed by Jul 2021. Management also expects minimal disruptions to its production in Malaysia due to the movement controls there.
Reiterate Add with an unchanged TP of S$1.91 We keep our Add call on AZTECH with an unchanged TP of S$1.91, still based on c.16x FY22F EPS, a premium to Singapore technology sector average, given its high ROE supported by capacity expansion and robust order book providing strong net profit growth potential of c.18% CAGR over FY20F-23F, in our view. New customer wins could re-rate the stock. Key downside risks: execution risks from Covid-19 disruptions.














(Non-SGX Report) Aztech Global Ltd: Abiding by Its Growth Story

Singapore

Aztech Global Ltd. is a key technology enabler for the connected world of tomorrow, with a focus on providing one-stop design and manufacturing services. Supported by core strengths in R&D, design, engineering and manufacturing, our key products are IoT Devices, Data-communication products and LED lighting products.

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