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NRA Capital Pte Ltd

Written by: Jacky Lee

Tuesday 19 May 2015

Amtek Engineering – 3QFY06/15 results briefing

More bargaining chips after acquiring Interplex Industries

With 6% yield expectation, we believe the stock looks attractive at current level.

Amtek Engineering’s 3QFY06/15 revenue grew 65% yoy to US$242.6m which included the consolidated results of Interplex Industries Inc. (Interplex) for the entire quarter. Net profit increased to US$10.5m from US$1.6m in 3QFY06/14 on the back of improved operating performance from existing operations as well as contributions from Interplex. The group generated free cash flow of US$10m in 3QFY06/15.

In 2014, Amtek acquired Interplex Industries, Inc., a global leader in miniature precision engineering solutions. Interplex, which is headquartered in the United States, offers miniature precision metal, plastic and assembly solutions to a blue chip customer base in a variety of industries, including the automotive, industrial/electrical, mobile devices and medical markets. Today, Amtek Engineering is recognized as one of the world’s leading precision engineering companies. The group offers end-to-end solutions that encompass design, prototyping, tool and die and mould making, precision metal stamping, plastics and rubber moulding, machining, welding, finishing, and electro-mechanical and mechanical product assembly and testing.

Key takeaways from 3QFY06/15 results briefing:

  • Automotive division increased by 214% yoy in 3QFY06/15 to US$67.4m, due mainly to organic growth as well as new contribution from Interplex.
  • Automotive sector now the largest contributor at 25% as of YTD FY06/15.
  • Imaging and Printing declined 16% yoy due to changing consumer preference for digital media against traditional print media. The group expects this segment remains to be weak
  • Demand for Mass Storage (Hard Disk) products showed tentative signs of improvement in 3QFY06/15. As a result, this product sector grew 5% yoy to U$18.3m. This segment expects to remain stable and good cash flow generating.
  • Top 10 customers now contribute approximately 60% of total group revenue, while the top customer accounted for 6-7%.
  • Sales from China contribute around 50%, Euro 10%, USA and South East Asia 20-30%.
  • Tooling sales remain strong for now.
  • Global headcount around 13k and approximately 660 customers currently.
  • 1Q15 utilization at 57% for its 43 plants. Restructuring on-going and doing some optimization.
  • Effective income tax expected to be around 20%.
  • Capex expected to be same as last year around US$30-40m, the group will continue spending to improve its automation process.
  • Cash conversion cycle days have increased from 26 day as at Jun-14 to 53 days as at March quarter after consolidation of Interplex. However, the group is looking to improve its CCC back to its pre-acquisition level.


At S$0.70, Amtek trades at 1.7x PBR and 7.9x consensus FY06/15 PER. The consensus US$10.1m net profit forecast in 4QFY06/15 is almost flat qoq from 3QFY06/15. Generally, Jan-Mar quarter is usually weakest quarter for manufacturers. We believe Amtek could beat consensus net profit in FY15 given there is still room to improve its EBIT margins.

The main concern is the higher net gearing of 1.28x. However, if the group can improve CCC days back to pre-acquisition levels, gearing should be manageable. With 6% yield expectation, potential to further improve its utilization rate, we believe the stock is not expensive at current level.

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