SFP Tech to add capacity, diversify business

SFP Tech Holdings Bhd’s plan to expand its production capacity through the construction of Manufacturing Plant 3 will enable it to take on additional business opportunities and qualify for new potential customers.

SFP Tech is scheduled to list on the ACE Market of Bursa Malaysia on June 20 at an issue price of 30 sen a share.  

The Manufacturing Plant 3 will expand its floor space from 147,000 sq ft to about 467,000 sq ft and is expected to be completed by the end of the second quarter of 2022 (2Q22), Mercury Securities Sdn Bhd analyst Ronnie Tan wrote in a report today.

Tan added SPF Tech plans to diversify its revenue stream by venturing into the semiconductor rear inspection industry, by producing an inspection equipment operator platform equipped with electronic and camera imaging systems. 

He noted the company is expected to begin designing and manufacturing generic machine frames in the 1Q23. 

“SFP Tech plans to purchase one new laser tube cutting machine and 41 new five-axis computer numerical control machines within the next three years. 

“The new machine is expected to increase the maximum production hours capacity of SFP Tech by about 25.3%,” Tan wrote.

He added SPF Tech has an orderbook of RM20 million, of which RM16.92 million is for its engineering support services segment and RM3.27 million for its automated equipment solutions segment.

The inclusion of the automated equipment solutions business segment through the acquisition of EST Exhibit Automation Sdn Bhd in 2021 will enable SFP Tech to provide a wider range of services and cross-sell both automated equipment solutions and engineering support services to potential and existing customers in the engineering support industry (ESI).

The analyst has a ‘Subscribe’ call on SFP Tech with a fair value of 56 sen a share based on the financial year of 2023 earnings per share of 3.7 sen and peers average price earning of 15.2 times.

“We like the stock for its attractive growth prospect and cheap valuations on the back of a growing ESI in Malaysia which is expected to grow at a five-year compound annual growth rate of 8.9% from 2022 to 2026 as forecasted by Protege.

“The target price represents a potential return of 86.6% over the IPO price,” Tan stated.

Risk factors include a fluctuation in raw material prices and skilled labour shortages. — by SHAFIQQUL ALIFF / pic source sfptechholdings.com