Capability differentiation makes this a “buy”

CGS-CIMB Research has initiated coverage on Grand Venture Technology (GVT) with an “add” or “buy” call and target price of 26.2 cents.

GVT is an established manufacturing component solutions provider with over six years of experience. Its chairman, Ricky Lee, has been involved in the precision engineering industry for more than 37 years.

The company was listed on Jan 23, 2019, at an IPO price of 27.5 cents.

According to analysts William Tng and Darren Ong, most of the proceeds from the IPO have been spent on capacity expansion and acquiring more advanced machineries.

The analysts also believe the company, being one of the few manufacturers in Southeast Asia with ceramic and quartz machining know-how, helps differentiate it from the rest of its competitors.

GVT is exploring the possibility of expanding its ceramic and quartz machining capabilities with Sico Technology and its Singapore subsidiary, Sico Asia Quartz.

It is also developing sub-micron machining capabilities to cater to customers in the analytical life sciences industry, and investing in robotics and software for transformation into a smart factory.

Tng and Ong have forecasted GVT to rake in a net profit of $3.4 million for FY20F, up from FY19’s actual earnings of $3.1 million, and a core earnings per share of 1.5 cents for the same year.

“Downside risks include a deterioration in customer demand due to escalation of the Covid-19 outbreak. Re-rating catalysts are earnings-accretive M&A and better-than-expected customer demand,” they add. —