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.

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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

<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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<ul>
<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

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

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<p>For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. </p>
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<p>This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. </p>
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<p>In this report, we identify that <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> , <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and <a href="https://www.smartkarma.com/entities/singapore-post-ltd" target="_blank" data-smartkarma-citation="entities:150:1" rel="noopener">Singapore Post (SPOST SP)</a>as winners while <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> and <a href="https://www.smartkarma.com/entities/genting-singapore-ltd" target="_blank" data-smartkarma-citation="entities:439:1" rel="noopener">Genting Singapore (GENS SP)</a>as losers. </p>

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 

This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP) and Genting Singapore (GENS SP)as losers. 

Singapore Mini Lockdown: Winners and Losers

<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>
<h2>Aztech Global Ltd</h2>
<h3>Blinking growth</h3>
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<li>Johor plant’s area expansion by 89% underway by 1H21F to support 30% higher volume production from Customer A, according to management.</li>
<li>We forecast AZTECH to deliver a 18.4% net profit CAGR between FY21F and FY23F from strong IoT demand and a robust order book.</li>
<li>Initiate coverage on AZTECH with an Add rating and a P/E-based TP of S$1.91. The group’s order book stands at $489m as of end 1Q21.</li>
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<p><strong>Top 10 best smart security camera in US</strong><br>Aztech Global Ltd (AZTECH) is an electronics manufacturing service provider to blue chip brand owners, primarily for their Internet-of-Things (IoT) and data communication products. Smart security cameras manufactured by AZTECH was voted among the top ten best smart security cameras for 2021 according to Safewise.com. With the global IoT market set to deliver a 20.8% CAGR to reach US$425.2bn by 2023F according to Frost &amp; Sullivan, we believe decreasing average prices of IoT sensors will further accelerate adoption rates. IoT-related revenue accounted for c.88% of AZTECH’s FY20 revenue and we believe should drive future net profit growth, given its higher margin profile.</p>
<p><strong>Factory expansion by 89% is underway to support volume increase</strong><br>Key takeaways from our company visit include: 1) a factory expansion of 89% to c.86,000 sq ft, which is underway at AZTECH’s Johor Bahru plant in Malaysia, 2) Customer A’s (major customer accounting for over 60% FY20 revenue) guidance for an over 30% increase in volume production of its smart security cameras in FY21F, and 3) AZTECH’s expectation of a stronger order book and to potentially start manufacturing a new line of products for Customer A in 2H21F. We believe AZTECH’s smart security cameras offer a compelling price-performance trade off based on our analysis of current market offerings to remain popular among consumers. We forecast AZTECH to register a 18.4% net profit CAGR to achieve net profit margins of 11.6%-11.9% between FY21-23F.</p>
<p><strong>New contracts win and completing the smart home value chain</strong><br>As at end-1Q21, AZTECH has secured 11 new customers and projects, of which they are the sole supplier to two new lines of products of Customer A. Management expects to see contributions from new contract wins to come in FY22F. We believe as consumers continue to invest in the smart home ecosystem, this offers an opportunity for AZTECH to further expand its IoT product manufacturing portfolio within the smart home value chain to drive its multi-year earnings runway, in our view.</p>
<p><strong>Initiate with Add and a P/E-based TP of S$1.91</strong><br>We initiate coverage on AZTECH with an Add rating and a S$1.91 target price based on 16x FY22F P/E supported by capacity expansion and robust order book, which provide strong net profit growth potential of c.18% CAGR over FY21F-23F, in our view. Re-rating catalysts are new customer wins and strong order book. Downside risks include customer concentration risk and high competition.</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
Blinking growth





Johor plant’s area expansion by 89% underway by 1H21F to support 30% higher volume production from Customer A, according to management.
We forecast AZTECH to deliver a 18.4% net profit CAGR between FY21F and FY23F from strong IoT demand and a robust order book.
Initiate coverage on AZTECH with an Add rating and a P/E-based TP of S$1.91. The group’s order book stands at $489m as of end 1Q21.





Top 10 best smart security camera in US Aztech Global Ltd (AZTECH) is an electronics manufacturing service provider to blue chip brand owners, primarily for their Internet-of-Things (IoT) and data communication products. Smart security cameras manufactured by AZTECH was voted among the top ten best smart security cameras for 2021 according to Safewise.com. With the global IoT market set to deliver a 20.8% CAGR to reach US$425.2bn by 2023F according to Frost &amp; Sullivan, we believe decreasing average prices of IoT sensors will further accelerate adoption rates. IoT-related revenue accounted for c.88% of AZTECH’s FY20 revenue and we believe should drive future net profit growth, given its higher margin profile.
Factory expansion by 89% is underway to support volume increase Key takeaways from our company visit include: 1) a factory expansion of 89% to c.86,000 sq ft, which is underway at AZTECH’s Johor Bahru plant in Malaysia, 2) Customer A’s (major customer accounting for over 60% FY20 revenue) guidance for an over 30% increase in volume production of its smart security cameras in FY21F, and 3) AZTECH’s expectation of a stronger order book and to potentially start manufacturing a new line of products for Customer A in 2H21F. We believe AZTECH’s smart security cameras offer a compelling price-performance trade off based on our analysis of current market offerings to remain popular among consumers. We forecast AZTECH to register a 18.4% net profit CAGR to achieve net profit margins of 11.6%-11.9% between FY21-23F.
New contracts win and completing the smart home value chain As at end-1Q21, AZTECH has secured 11 new customers and projects, of which they are the sole supplier to two new lines of products of Customer A. Management expects to see contributions from new contract wins to come in FY22F. We believe as consumers continue to invest in the smart home ecosystem, this offers an opportunity for AZTECH to further expand its IoT product manufacturing portfolio within the smart home value chain to drive its multi-year earnings runway, in our view.
Initiate with Add and a P/E-based TP of S$1.91 We initiate coverage on AZTECH with an Add rating and a S$1.91 target price based on 16x FY22F P/E supported by capacity expansion and robust order book, which provide strong net profit growth potential of c.18% CAGR over FY21F-23F, in our view. Re-rating catalysts are new customer wins and strong order book. Downside risks include customer concentration risk and high competition.









(Non-SGX Report) Aztech Global Ltd: Blinking Growth

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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Aztech Global (AZTECH SP)

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Singapore Exchange Ltd (SGX)

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

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

Singapore Mini Lockdown: Winners and Losers

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP)...

Henry Soediarko

(Non-SGX Report) Aztech Global Ltd: Blinking Growth

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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