MAYBANK IB EXPECTS GREATECH TO SECURE EARNINGS GROWTH FROM PLS ORDERS

KUALA LUMPUR, Feb 19 -- Maybank Investment Bank Bhd (Maybank IB) expects Greatech Technology Bhd to look forward to more earnings growth prospects on the back of production line system (PLS) orders from its existing and new customers.

Maybank IB also expects potentially larger order book for the factory automation solutions provider in the near future would be supported by additional production capacity at its upcoming second plant in Batu Kawan, Penang.

It said the plant will be ready by the second half of 2021 with estimated capital expenditure of RM77 million.

“There are several risk factors for our earnings estimates, target price and rating for Greatech. A downturn in the photovoltaic (PV) industry will affect Greatech’s earnings,” Maybank IB said in a research note.

Additionally, forex volatility, especially US dollar/ringgit, would also affect Greatech’s earnings, as more than two-thirds of its revenue and about one third of its cost of goods sold were denominated in US dollar, the investment bank said.

 Maybank IB said Greatech’s core earnings for financial year ended Dec 31, 2020 (FY20) were in line with its estimate at 102 per cent/105 per cent.

“We adjust our estimate earnings for financial year 2021 and 2022 by 1.0 per cent-2.0 per cent and nudge up our target price by 0.5 sen to RM6.75,” Maybank IB said.

Maybank IB has upgraded Greatech to a “buy” call as the investment bank was positive on Greatech sustaining its solid order book and growth catalysts from new orders and customers with potential capital upside at 11 per cent.

-- BERNAMA