Thursday, March 12, 2015


Memtech: Old kid getting new attention: impressive turnaround in FY14
The electronics component maker has been gathering higher trading volumes since its FY14 results release end Feb, but has yet to receive any broker coverage.

Memtech is principally a customized components manufacturer for the consumer electronics and automotive sectors.

In FY12, it disposed of its loss-making keypad business in Huzhou and in FY13, it made the strategic move to diversify its product range into precision and decorative rubber and plastic parts for automotive, highly decorative parts for consumer digital products, and modular components for niche industrial and medical sectors.

Following the transformation, the group has turned profitable since 3Q13. In FY14, it raked in US$17.2m profits, reversing from US$4.4m loss in FY13, on revenue of US$137.6m (+18). Gross margin improved 1.9ppt to 17.5% despite the reclassification of packaging cost to cost of sales.

Operations have stabilized post-transition and plant fire in Feb '13. Core profit excluding liquidation and disposal gains and impairments turned around to US$6.2m in FY14 from loss of US$3.5m in previous year.

Memtech is not a new kid on the block. It has solid long-standing relationships with major international names such as Huawei, Lenovo, Samsung and Netgear in the consumer electronics space.

In its newer automotive segment, it supplies to global automotive parts suppliers such as Germany’s Hella and KOSTAL, Canada’s Magna, America’s Lear and Japan’s Denso. Most recently, it is also working directly with car manufacturers Volkswagen, General Motors and Tesla.

The group has three manufacturing sites in Dongguan in Guangdong Province, Kunshan and Nantong in Jiangsu Province, in China

Memtech has strong financials, with net cash position of US$29.1m, inventory turnover of 9.9x, and ROE way above peers at 15.3%

Valuations appear undemanding, with core trailing P/E of 8.8x, which is a big discount to its bigger peers trading at around 15x.

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