Mi Equipment’s IPO offers value

By RAHIMI YUNUS / GRAPHIC BY TMR

Inter-Pacific Research Sdn Bhd has set a fair value of RM1.71 to Mi Equipment Holdings Bhd’s initial public offering (IPO), based on 13 times earnings per share in the financial year 2018, compared to its offer price of RM1.42.

The research house reported that there could be a potential upside of 22% and a total return of 23.5%, including dividends from Mi Equipment.

The broker’s report noted the valuation was justified based on market valuations for an industry peer, ASM Pacific Technology Ltd, which trades at a forward price-to-earnings ratio of 14.5 times.

Inter-Pacific Research made a ‘Subscribe’ call to the IPO, inclusive of two risks — foreign-exchange volatility and any strengthening of the ringgit; and delay in expansion plans.

Mi Equipment is seeking to raise RM191 million from its IPO on the Main Market of Bursa Malaysia scheduled for June 20, 2018.

The wafer level chip scale packaging sorting machine manufacturer plans to use RM140 million, or 73% of the proceeds, to build two new factories at its base in Penang over the next two years.

Some RM36.8 million will be used for general working capital and the remaining RM14.1 million will be used for research and development, and listing expenses.

The listing, the first on the Main Market this year, involves a total offering of 152.95 million ordinary shares, consisting of a public issue of 134.43 million new shares and an offer for sale of 18.52 million existing shares at RM1.42 apiece.

The two new facilities, one in Bayan Lepas and another in Batu Kawan, are expected to increase its current capacity by sevenfold to 90 machines per month by 2020, or by 45 machines from each factory.

The Bayan Lepas factory is slated for completion in the first quarter of 2019 (1Q19) and will be operational in 2Q19.

The Batu Kawan factory will be completed in 3Q20 and be operational in 4Q20. For its financial year 2017 (FY17), Mi Equipment posted a revenue of RM173.3 million and a net profit of RM59.3 million.

Its revenue and net profit have recorded an annual growth rate of 32.6% and 47.7% respectively, over four years between FY14 and FY17.

Some 83% of its revenue in FY17 was contributed by overseas customers, including integrated device manufacturer and outsourced semiconductor assembly and test companies from China, Taiwan, Korea and others.

Mi Equipment has a dividend policy payout rate of at least 20% of net profit.